By Andy McCue, 26 January 2004 17:25
NEWS A new US law that will ban the outsourcing of US federal public sector work to low-cost offshore countries has been slammed as protectionist by India's IT industry.
The US bill was passed by the Senate last week and is now just waiting to be rubber-stamped by President George W. Bush before it becomes law.
Kiran Karnik, president of the National Association of Software and Services Companies (Nasscom), said in Indian newspaper reports that he was "dismayed" by the law.
"Such a bill is not in keeping with the increasing globalisation of trade, which benefits all countries, and is contrary to the spirit of free trade being promoted by WTO and long espoused by the United States," he said.
The law is not likely to have a major effect on India's burgeoning offshore IT industry as US government contracts account for just two per cent of India's IT income, but the Indian IT industry is worried that it will set a damaging precedent.
Indian software and IT services companies are also involved in a battle with the Indian government over proposals that could see the Indian subsidiaries of European and US companies taxed on core activities.
The revenues from India's IT industry are expected to rise by a third to £8.5bn for the fiscal year ending in March.
Comments
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1. anonymous
As the owner of a small software house, we have seen our services dwindle to nothing. I think this is a good idea as our IT industry in the UK is suffering. We have much higher taxes and cost of living over here for IT workers, so it is not a level playing field anyway. You can understand the Indians though - their gravy train could run into the buffers if the trend continues.
2. alistair westerman
It always seems to be that when "free trade" is mentioned, people really mean "our trade". How can developing countries claim to be the victim in this when they are already at an advantage with the poor wages that they allow to be paid to their people?
If they win these contracts on the basis of equal or better service then that is true fair trade but when it is purely down to the fact that large corporations can get away with paying poverty wages then that is exploitation.
3. anonymous
Our main software house moved to India some time ago. Since then the 'scale' of service available to us has increased as we can e-mail AND have Yahoo/MS Chat with them. HOWEVER, they continually don't understand or grasp the buisiness impact of some of the problems we have. Also, we find that they take hold of only one aspect of a problem and focus on it without considering the effect of one part of the issue on another.
4. Joseph Bennie
Offshoring is generally a good idea, i really dont think that europeans will follow the american president, but it just goes to prove that the americans are hypocrits, and the world would be wise to realise that they are not an example to be followed.
5. anonymous
It was inevitable and predictable, The US want free and fair trade as long as it works in its favour.
6. anonymous
I applaud the US decision. People lose sight of the fact that a govt's purpose is to improve the welfare of it's citizens. This law will protect US jobs, and if that is deemed protectionist, then sobeit.
7. anonymous
Why the Fuss? The keyword here is FEDERAL - that means government held data. Would you be comfortable if you knew that your Tax records or Social Security records were being handled outside the UK? I certainly wouldn't and I would expect the majority of people would feel the same way. So I'm not at all surprised that the US government has set people's minds at rest by saying "It won't happen".
8. anonymous
I agree with the US on the basis of 'Service Provided'. I have recently cancelled a support contract with a UK based firm because of their 'tech support' outsourcing to India. My reason being 100% down to communication. When you require technical support, the last thing you need is to have to spell every other word you say or try to explain your issues.
9. sam sanka
While the developed nations want to implement WTO which guarantees access to markets for "GOODS", India must project its need for free access to markets to provide its cutting edge, cost-effective "SERVICES".
So unless something drastically is done, I see WTO talks not progressing and everybody relegating to the same old protectionist regime.
10. Sai Boonwaat
It is high time someone did something to protect the IT industry within its own country. The UK could learn a few lessons, instead we have a massive IT unemployment problem.
11. anonymous
Yet again the US flaunts international law and does something to protect it's own fat lazy workers at the expense of others. Surely by now we must be aware that the US promotes the 'do what I say, not what I do' rational. Frankly, the UN needs to crack down on this type of behaviour. The US can impose illegal import tarriffs on steel to protect it's uncompetitive workforce and can hold prisoners indefinitely without adhering to the Geneva convention. Tell me, who is the terrorist here?
12. anonymous
I have to applaud the US and wonder why people think it is wrong. In the UK, if you want to bring in a foreign national and get a work permit then I believe you have to show that the job could not have been done by a British (or now I guess an EU) citizen.
Companies are getting round this by shipping the work off to cheap countries. I'm sorry but I don't believe ANYONE outsources to India for any other reason than they can pay them peanuts.
The techs out there maybe low paid paid their money goes a long way so they are not poor.
13. anonymous
Cheap labor. Why? It's about quality and not cheap human ressources. I fully comply with the US's policy to protect the Nation's Software Developers.
14. Dharmendra Misra
I feel that now any move like Ban on outsource will create more problems for US than for India. First of all latest economic revival has come due to India, China and Brazil. US economy is weakening continuously and upcoming presidential elections are going to make it worse as govt. can not curb spendings properly. For Indians, I think its going to be boon. Indian professionals are trying to shift upward in the field of ITES and such type of restrictions will help them and motivate them. We should never forget that India has grown at that level from which she can help herselp. Now US needs India more than India needs US.
Business world should not forget the effect of Ban on India due to Nuke test before few years. FDI and FII in India are too low to her GNP. and in GNP part of GDP is too high so where are you banning are country like India
15. Richard Halpert
India can complain all it wants. "Free Trade" as it stands now, is not "Free" at all. Most of these countries do NOT have the labor protections and regulation we have here in the United States, thus enabling them to undercut US labor costs. This is what is known as an unfair playing field. American labor cannot compete fairly against this kind of labor anymore than it could compete against slave labor. I am not a protectionist, or against free trade of goods. But, when it comes to the "free" trade of labor and services, it should be on an equal footing as far as regulatory practices and labor laws and minimum wage. Also, it is fair to tax companies more on unemployment and retraining costs that engage in offshoring, outsourcing to foreign countries. If they plan on turning the US economy into a third country economy, then they should be expected to pay higher taxes.
16. anonymous
Great News! It is the leading edge of a trend in the US, I believe, to restore US-based apps development to
US shores. Cheaper labor hardly begins to equate to better value, and more US firms will awaken to this going forward.
17. anonymous
If all costs were equal, I would have no problem competing with India - however, the costs are not equal. My wages are higher because I pay taxes and healthcare costs, so my cost of living is higher (and so is my standard of living). If I were India, I would worry about China "stealing" their outsourcing, since China has an even lower cost.
Besides, once my data leaves the US, I no longer have control over the confidentiality of it - but I am still responsible for its security, and that is a situation that is a no-win for me.
18. anonymous
Let india outsource their government work to the us and we will do it cheap. Let's see how they react. We have no control over these countries and who is to say that they will honor our privacy laws. There is no way to enforce anything.
19. anonymous
The ICT manager from UK complaints point to the fact that most probably they chose the offshore IT company based only on cost and/or they did not do supplier familiarisation of their business. The latter support the former.
20. anonymous
For once i agree with the US and we should follow suit ....
Yesterday i ended up in India using my 'local banks' recently outsourced telephone banking service. They couldn't pronounce my name, transferred money to some lucky person i don't even know and didn't understand how an ISA worked .... i then got transferred back to someone in the UK who wasn't attempting to read off a script and rectified the problem. When your trying to sell a quality brand, you need to support it with a quality service.
21. Carlos
India has some of the most restrictive trade policies and highest tariffs on the planet. In fact, tariffs are one of the major sources of government income in India. http://www.wto.org/english/tratop_e/tpr_e/tp196_e.htm
Yet, it is the U.S. with its carelessly open market that is called the hypocrite. It has been said that the U.S. only wants trade when it has an advantage. This statement is ludicrous. The U.S. runs a trade deficit with nearly every trading “partner”. $103 billion with China alone. http://washingtontimes.com/upi-breaking/20031212-031847-4315r.htm.
Finally, after millions of jobs lost, the U.S. government places a very tiny restriction on outsourcing Federal jobs, and India acts like it’s the end of the world. Americans are just asking their government to stop taking money directly out of their pockets, in the form of tax dollars, and giving it to foreigners.
22. anonymous
Maliciously disrupting a nation's infrastructure is considered to be treason. No argument with that. In many civilised countries, including the USA, treason still carries the death penalty (quite rightly so!).
Wanton virus distribution disrupts the infrastructure of nations. People definitely die as a result. It is treason. Virus perpetrators should therefore be executed upon conviction.
23. anonymous
If we outsource key services to other economies, how will it affect our longer term viability as a technology breeding ground for future generations?
Good for the silo'ed balance sheet accountant, bad for the long-term economic prospects of the country?
Plan with the end in mind!
24. anonymous
If we outsource key services to other economies, how will it affect our longer term viability as a technology breeding ground for future generations?
Good for the silo'ed balance sheet accountant, bad for the long-term economic prospects of the country?
Plan with the end in mind!
25. anonymous
Offshoring is the single most damaging trend in the UK/US IT Business. Simple as that. Offshoring is nothing to do with service, technical know how or anything else, its all about profit margin....but as one very knowledgeable IT Director told me recently, the IT industry is cyclic, so this trend will reverse at some point.....Its about profiteering and thats all that matters to modern business. NOT the welfare of the workers, not the quality of service and certainly not the customer! Personally I cant wait for a customer backlash against the poor service we are seeing in recent trends, and not only in IT!
26. anonymous
There's nothing wrong with a country trying to help its own citizens. There are still thousands of IT professionals out of work here in the US, while companies find more excuses to outsource that work out of pure greed. The first reponsiblity of the US is to its own citizens, not the rest of the world. I heartily applaud the proposal and hope that many more follow.
27. anonymous
Hypocrisy.
The Indian and State govts. buy loads and loads of software from Mircro$oft and plenty other vendors.