Participating in a debate on offshore outsourcing in The Wall Street Journal last week, Professor Jagdish N. Bhagwati of the Columbia University and Paul Craig, chairman of the Washington-based think tank, the Institute for Political Economy, addressed various aspects of the subject.

Craig said it was “hard to see the benefit to the country [the U.S.] whose firms outsource.” According to him, with domestic capital and technology reallocated to the employment of foreign labor, there would be less to employ domestic labor.

“As industries move offshore, suppliers are forced to follow. The domestic economy becomes a less efficient place to produce as concentrations of skills are diluted by movement offshore.”

Bhagwati, an expert on trade and defender of offshore outsourcing, quoted Bureau of Labor Statistics for the period 1999-2002 which showed that despite the furore over outsourcing, jobs in four information technology sectors had expanded, albeit slowly. He identified a “not as strong” social safety net in the U.S. as a major factor hampering adjustment to import competition.




India’s outsourcing tigers seek cover, markets in East Europe

India’s outsourcing firms have a new target: Europe’s expanding eastern rim, according to The Wall Street Journal.
But rather than trigger a new outcry, the low-profileng of offices mainly in the Czech Republic, Hungary and Poland will help quell concerns increasingly voiced by Western European and U.S. politicians. “Indian outsourcing companies need a presence in Europe to make their big clients comfortable,” says Sunil Mehta, vice president of India’s National Association of Software and Service Companies, or Nasscom.
Satyam Computer Services Ltd. plans to start a software development center in the Czech Republic, Hungary or Poland later this year. Tata Consultancy Services Ltd., software arm of one of India’s biggest conglomerates, the Tata group, was among the first to gain a toehold in the region last year when it set up a software development center employing 160 engineers in Budapest. The center serves TCS clients in the E.U., the Journal reported. Progeon Ltd., the back-office services arm of software major Infosys Technologies Ltd., plans toits first overseas arm in the Czech Republic by the third quarter of this year.


Rise in offshore jobs expected, says Jones Lang LaSalle Inc. survey

Eighty percent of real-estate executives for major companies say they are likely to increase their offshore call centers and computer services over the next five years, according to a new survey, reported The Wall Street Journal.

The effects will not be felt in the major metropolitan office markets but will, instead, fall on suburban and secondary U.S. markets. The majority of the executives say they are creating new jobs overseas instead of replacing U.S. jobs. But 42.5% say they are transferring U.S. jobs overseas, according to the survey of 40 Fortune 1000 companies by Jones Lang LaSalle Inc., a Chicago-based commercial real-estate services provider.

The movement will affect different types of U.S. markets in different ways, says Bruce Rutherford, an international director for Jones Lang LaSalle in Houston. The movement of call centers overseas will have the most impact on secondary markets, while information-technology job losses will continue to hit tech-heavy markets like Silicon Valley and Boston. Back-office job losses will hurt suburban office markets, particularly in the south and Southwest, Rutherford says. The trend is almost completely driven by labor costs, not by any savings in real-estate costs.