The Professional Perspective
The impact of the immigration question upon outsourcing is an issue affecting every corner of the outsourcing space – so in addition to our lead feature, and our provider interview, in the Winter 2010 issue we threw the debate open to our community via Twitter, LinkedIn and email, asking the question: can – and should – the twin pressures of anti-immigration lobbying and the requirements of businesses in developed economies be reconciled at a legislative level – and what would be the impact on the outsourcing space? Here, we present extracts from the resulting debate: forthright opinions from a wide variety of perspectives.
Meena Jaiswal, EXL Services: Outsourcing is not a new concept; it has been in place for a very long time. Offshoring is something which is prominent nowadays and catching every country’s eyes. We talk about globalisation, the benefits of it, boast about it – and then restrict the movement of human resources. It seems the business/economic growth equation is changing due to offshoring. Countries need to understand this concept has emerged from the immediate needs of various businesses, and whatever legal regulations we try to enforce to curb offshoring will not be successful. It is better that the immigration laws cater to this business need; if a country fails to do the same it would be their loss…
Amit Badami, EMRG: We live in an increasingly globalised world. Companies and countries are competing against each other like never before. Creating organisations that are agile, highly competitive and profitable is not a luxury any more but a necessity. How else are company share prices going to continuously rise to help pay for future pensions… amongst other considerations. Countries where possible should be run more like companies. [For example] UK Plc (during the last ten years) should have had a far more disciplined “recruitment” policy: the way the Singapore government runs its economy is a good example.
If UK Plc is not able to source the human capital it needs, it will eventually lose out. What may happen – and is already happening – is that where direct day-to-day human contact is not essential and where the skill-set is not available in the UK (or is available but at a much higher cost), the company will source that perhaps using one of its foreign subsidiaries (captive) or via a third-party outsource provider. Outsourcing/offshoring may therefore increase, not decrease. An anti-immigration policy may actually backfire as companies who need to get the work done will just shift it offshore – if they can’t source the staff locally.
Another question is the growing skills gap in this country: what is being done to address that. Is the UK losing its competitive edge? Yes, it has been for the last 30 years
– first in manufacturing and now in services. Perhaps an “injection” of highly skilled/talented human capital is what this country needs more than anything else just now….
Marc Kauffmann, The Kauffmann Group: I agree with Amit. We live in a global economy. Therefore, I have no problem with low-paying jobs being outsourced to India, the Philippines, China, etc. This forces the US to develop new opportunities that will leverage the talents of our citizenry. Unfortunately, our politicians may have a different perspective. I believe that they are taking a myopic approach and not seriously considering that the US needs to grow new industries and companies.
Jon W. Hansen, Procurement Insights: The connection between immigration policy within developed economy countries is a major battleground in terms of emerging key tertiary and quaternary sectors (reference the Clark and Fourastie three-sector – now four – hypothesis of how a wealthy nation’s economy will develop) such as IT, services and R&D. In fact, notable pundits such as Ariana Huffington have expressed concerns that the US is becoming a third-world country in IT.
Vivek Wadhwa, Harvard Law School & Duke University: Everything can be reconciled/resolved if there is a political will and rational intent. The problem with both issues is that politicians are pandering to uninformed segments of their electorate. What people don’t understand is that the majority of the revenues of leading American corporations now comes from abroad – so companies are bound to have the majority of their employees abroad. And that immigrants have founded the majority of Silicon Valley tech companies: they have made the pie bigger and the country more innovative and competitive. Until these issues are understood I doubt any policies will be reconciled.
Jerry Durant, IIOM: It seems to be that the politicians are the ones that have created this problem. On one hand they like immigration in order to fuel the economy, yet on the other hand they don’t want immigrants to be productive if they are working for an offshore concern. Likewise as Vivek mentioned, the politicians are pandering to the public with little or no valid information concerning the impact of outsourcing. Just because a job lands in another country does not consider the fact that, if it hadn’t, the possibility of corporate collapse might have taken place. Further, have any of them considered in our imperialistic quest for money that we aren’t a bit afraid to behave in an inverse sense by selling our products into these same markets?
Prashant Walia, Wipro BPO: My two cents: understand the nuances of a global economy from upstream (sourcing, production etc) to downstream (markets). What we had a couple of decades ago wherein there were states within a nation trying to woo talent/investment has changed: now the states have been replaced by nations. Business context and free markets will always win: you can artificially thwart them for a period with policies, but we need to provide for avenues – as water still flows the path of minimal resistance else the dam breaks. Look ahead and focus on the what role can our nation can play, based on, one, demographics and two, natural resources.
Next steps? Define a future position – and then pull all stops to achieve it via focused education. In my view any policy cannot be sustainable without the global context.
Saif Bonar, WhichLance.com: No easy answer to this: it’s an incredibly complex area of economics and global business, probably too complex for comprehension by the US legislature. I am of the opinion that an Adam Smith-style, laissez faire approach is appropriate, even essential. To tackle offshore outsourcing through the legislature is a step too far in my opinion.
Government has the power to curb offshore outsourcing through tax breaks, incentives and other fiscal and social stimulus packages. In order to reduce the economic threat posed by offshoring, the government should review, revise an update these stimuli to ensure they continue to be attractive to big business, while also making them applicable and appealing to SMEs. It is their failure to do this which has lead to cost-benefit analysis proving the worth of outsourcing.
It is incredibly difficult to legislate against outsourcing and off-shoring and to do so will only serve to create a black-market and/or push businesses to relocate overseas in their entirety. The US is playing a dangerous game on outsourcing and if the rhetoric comes to much more than that, it will lead to massive problems. The G8 economies of the world have been ramming globalisation, the global economy and the like down everyone’s throats for the past few decades. A massive about-turn now will reset the clocks and undoubtedly lead to more economic hardship around the world.
On a practical level, how do you legislate against it? Would you render online outsourcing marketplaces illegal, would it spell the end for oDesk, Elance, vWorkers and similar small scale outsourcing websites? Or would it be aimed primarily at big business?
Is outsourcing the root of the problem? Or does it stem from sub-contracting which pre-dates outsourcing? Where do you draw the line? If BP could not outsource or sub-contract overseas, then that would kill off plenty of jobs in the US (and, arguably, you would not be cleaning up the biggest oil spill known to man). How about pharma? Should Eli Lilly, Glaxo and other firms be legally prevented from outsourcing or offshoring R&D to more exotic climes with lower overheads and access to different raw materials on which to perform research? Maybe a ban on outsourcing should be restricted to manufacturing. Then people in the US can pay ten times what everyone else pays for a TV, because it was made in Texas. That will surely help prop up your economy?
What about the military? Should they stop outsourcing procurement and build their own weapons? Maybe GE don’t want those lucrative contracts any more? If that outsourcing remains ok, fine, but should it all be done at home rather than in a GE lab in the UK, India or a third party’s labs elsewhere?
I think the horse has bolted: too many businesses know the value of outsourcing and its impact on their bottom line. They will therefore find ways to circumvent any legislation in order to continue to survive and thrive.
Also, as a final thought: if the US brings in some legislation against outsourcing, surely the rest of the world would need to follow? Or the US would be cutting itself off from the economic mainstream, making itself something of a pariah?
Ian Ippolito, Exhedra Solutions: Here in the US, anti-immigration lobbying actually comes in two distinct flavours. The first is from the Democratic far-left (anti-business) wing that Bobby and Jerry referred to, in which politicians have been playing to populist concerns about the poor economy by demonising the offshore outsourcing of white collar jobs as the cause of everyone’s woes. The second comes from the Republican far-right (anti-immigrant) wing, in which politicians play to the fear that certain white (typically male) people have in America, who are extremely uncomfortable discovering that they are no longer in the majority in a demographically changing country. These politicians are pushing to limit (or send back) immigrants performing blue-collar and low-wage jobs.
For the first flavour, I think the answer to the original question is that a practical legislative compromise exists. It would be one that provides some sort of extra financial government assistance for displaced workers (and retraining), while not limiting outsourcing (since it creates more economic opportunity for the businesses and the country as a whole than it destroys). However, this would require educating the electorate on some non-sound-bite-sized economic fundamentals, which would be a political challenge even in normal times. In today’s poor economic climate, people are not open to listening to this kind of thing and so I don’t think this is realistic.
Realistically in 2010-2012 we will see some anti-outsourcing pushback and bills from certain legislators. However it will be easily contained by the House (which is now controlled by the pro-business Republicans) and has little to no chance of becoming law.
For the second flavour, immigrants typically perform work that citizens would rather not do, and businesses and the economy depend on them. The practical legislative compromise is to give these people a way to become legal. However this was attempted by McCain and company a few years ago and they were not able to convince the far-right to “forgive and move on”. It seems unlikely to change with the economy much worse now. But since the Senate is controlled by the immigrant-friendly Democrats, there is no realistic chance of such a bill being passed into law.
Jon Hansen: From purely an immigration standpoint, my November 2009 interview with leading high-tech venture capitalist Brad Feld clearly demonstrates both the cause and effect impact government policy has on entrepreneurial zeal. From a economic lever standpoint, those countries that have transitioned from the traditional Primary and Secondary industry sectors to the Tertiary and Quaternary sectors vis-a-vis the Clark and Fourastie sector hypothesis, go hand-in hand with a country’s ability to attract emerging industry entrepreneurs and foreign investment.
What is worth noting is that a country such as India which is presently considered the “outsourcing capital of the world” (some experts suggest that South Africa is next in line to assume this mantle), has gained significantly from foreign investment and an dramatically increased standard of living as a result of their move to the Tertiary and Quaternary sectors. The key point to remember is that, like the old say about love and marriage going together, immigration policy and the economy also have an undeniable tie or link one to the other.
(To participate in future debates, make sure you keep an eye on our various channels including LinkedIn and Twitter. Want to comment on this article? Write to email@example.com)
“Whatever their motivations, lawmakers on both side of the aisle have certainly discovered that immigration is one of those issues that resonate strongly with the public.” – Gwen Ifill