Anti-outsourcing legislation 'bound to fail'

Global outsourcing of IT jobs from high-cost to lower cost regions has become "an inexorable phenomenon", and attempts in some developed countries to arrest this trend through legislation are bound to fail, according to Frost & Sullivan.

The analyst firm's recently published research across 14 countries, including the UK, France, Germany, Hong Kong, Japan and the US, found that IT job exports are forecast to increase by a compound annual growth rate of 5.9 per cent between 2002 and the end of 2004.

In 2004, a total of 826,540 IT jobs are expected to be exported by France, Germany, Hong Kong, Japan, the UK and the US to lower cost countries, amounting to a combined value of $51.6bn.

The study further predicts that the US and Japan will emerge as the top two exporters of IT jobs in 2004.

Germany is poised to lead the developed European nations by having exported a total of $48.22bn worth of IT jobs since the IT offshoring and outsourcing trend began. Coming in behind Germany are the UK and France.

Exporting IT jobs to lower cost countries is widely regarded as critical to survival in industries where other competitors are following this trend.

At the same time, hiring outsourcers abroad is seen as affording the flexibility to adjust personnel strength to business requirements at a lower cost and with a higher level of expertise.

"Multinational corporations can and will use offshore subsidiaries to circumvent the law in other parts of the world when profitability is at stake, provided executives cannot be held legally liable in the home country," said Frost & Sullivan industry analyst Jarad Carleton.

The study noted that, when a company is based in a country without restrictions regarding the exportation of IT jobs, and subsequently sells its products and services in a country that has restrictions, the company not limited by such legislation will possess a distinct market advantage.

"In effect, therefore, the nation that places restrictions on the export of IT jobs will hobble its own businesses, and could be inadvertently legislating the destruction of millions of additional jobs in the future as a result," warned Carleton.

"This is crucial to understanding why the exportation of IT jobs to lower cost countries cannot be arbitrarily halted by legislation in one or two developed countries."

Moreover, any legislative action to protect IT jobs in developed regions of the world will have to be part of a global alliance of developed governments to be effective, which the research suggests is unlikely.

Of the low cost countries examined by Frost & Sullivan, including India, China, Brazil, Mexico, Malaysia, Poland, Romania and Russia, India emerged as the single largest recipient of IT job imports, followed by China.

Customer and technical support, software development and testing, network administration, hardware development and testing, quality assurance and help desk ranked prominently among the outsourced IT positions over 2002 to 2004.

UK businesses were found to have exported software development and testing positions abroad more than any other IT position.