Cut Outsourcing = Cut Profits

A growing backlash against outsourcing — sending domestic work to foreign businesses — erupted in the Senate last week, where anti-outsourcing legislation was adopted on a 70 to 26 vote. Opponents of outsourcing cheered, but investors are becoming aware that these actions threaten profits and stock prices.

There is very little real evidence that outsourcing has caused significant job losses in the U.S. All of the data showing job losses in the millions come from consulting firms like McKinsey & Co., Forrester Research, and others, which make money by helping companies do outsourcing. It is in their interest to make potential clients think that all their competitors are doing it, so they must, too.

Of course, no one denies that some jobs have been outsourced. But companies often find that the gains don't match those sold them by the consultants. There are many costs involved with outsourcing that can eat up much of the savings from hiring Indians at one-fifth of what it takes to hire Americans for the same job.

This phenomenon is detailed in a March 3 Wall Street Journal report on ValiCert, a software company based in California that outsourced many operations to India. It quickly found that it required massive and costly effort just to communicate with its Indian workers, due to time differences and the contrasting styles, methods, and experiences of American and Indian software programmers. Moreover, the Indians just weren't as productive. It often took them a week to do projects that formerly could have been completed in two days here.

The story makes clear that ValiCert only ventured into outsourcing because it had no choice. The company was on the brink of bankruptcy. All of its jobs would have been lost if it hadn't been able to cut development costs. Although some American jobs were lost in the process, the company was able to remain in business, eventually leading to rising employment in the U.S. in higher-level positions.

Unfortunately, in such cases, people tend to see only the jobs that were lost initially from outsourcing and ignore the jobs that were saved or later gained because of it. General Electric makes this point in its latest proxy statement, in response to criticism from a union pension-fund shareholder. Its overseas expansion "has helped keep GE competitive and growing and, in many cases, helped to create and preserve jobs in the United States," the company argues.

To the extent that GE has outsourced, it is mainly for low-level operations. "Our outsourcing has largely consisted of obtaining commodity products and services from low-cost countries in order to remain competitive," it states.

The GE statement goes on to note that despite outsourcing, its U.S.-based employment has remained stable. The cost savings have helped finance additional domestic investments in "high-tech, high-value jobs in areas such as healthcare, digital entertainment, energy and water technologies, renewable resources and research and development."

Another company, Genworth Financial, has warned its shareholders that restrictions on outsourcing could threaten profits. In a January filing with the Securities and Exchange Commission, it said, "The political climate in the U.S. also could change so that it would not be practical for us to use international operations centers, such as call centers. This could adversely affect our ability to maintain or create low-cost operations outside the U.S."

This warning proved prescient. On March 4, the Senate adopted a measure that would bar federal contracts to companies that outsource any job previously done by an American. Additionally, it would prevent state and local governments from using federal funds for outsourcing.

While it is unlikely that this amendment will become law and is probably unenforceable even if it does, it sends a bad signal to the rest of the world. U.S. trade representative Bob Zoellick has warned that it will endanger relations with India and undermine world trade talks. It would also invite retaliation from other countries and reduce foreign investment in the U.S.

But even if the legislation is defeated this time around, undoubtedly it will be back in some other form shortly. Democrats have decided that pandering to the unemployed by railing against outsourcing is their ticket to success on Election Day. Although their proposals wouldn't do much good — the Washington Post calls them "1 percent solutions" — they get people worked up and put the Bush administration on the defensive.

The administration essentially brought this on itself by backing away from Council of Economic Advisers chairman Greg Mankiw after he was attacked for defending outsourcing a few weeks ago. Its enemies immediately saw weakness and pounced on its "evident confusion," as the Financial Times put it. It would have been better for the administration to stand behind Mankiw and make the case for free trade, as Bill Clinton was successfully able to do.

"Simply put, they are Communists, and anything they promise is not worth the effort made to write the promise down."

And you'll hold on to that until the moment that you need to use that old tired "Karl Marx believed in free trade" line I'm sure.

This isn't about your job or my job, it is about control.
This is Globalism - a move toward one world government, standardization of economies, of monies, etc. No more, no less. The US isn't going into it quietly and has refused to go into it quietly. As a result, we are being dealt with through deciet. This is just part of it - the tip of the iceburg. If ya'll only knew what is getting ready to happen.

Anyone who don't know God, now is a good time to start thinking about it. I won't shove God down anyone's throat. He respected your decision enough to leave it to you to make, I'll do no less. But, I'll at least extend a hand in offer for those that want help. Freepmail me if you need to talk about it or want some input.

"This is Globalism - a move toward one world government, standardization of economies, of monies, etc. No more, no less."

The entry of new nations into the world wide market is a move toward a one world government?

Here you go...

Toward it, not the establishment of it. It is happening piecemeal a little at a time. It's the same way communism happens - two steps forward, one back. Cuba. The USSR wanted a Military base there. They moved in, built the base and brought icbms with them. We didn't ask them to remove the base, we pushed till they moved the missiles. They got the base. You can keep your foil.

Deception is a fine art. And their is more to that game than meets the eye. I've no doubt this fits into that in some way. Doesn't bother me ultimately because it has to happen at some point. Want a conspiracy theory - the left owns the airwaves and is trying to pull the wool over our eyes for their own purposes. boogity boogity boogity.
Do you need a foil hat now? no. Deciet is known by those who see it for what it is. Nothing more or less. The purpose of deciet is to make it seem implausible. But then we all know that.

Not according to the communists. They recognized that the easiest way to promote unrest was to have unrestricted trade. Because the playing field isn't balanced. BTW, I just got official word today that as of sometime between July 1 and October 1 I will no longer have a job. Our employer is moving our entire facility to Mexico instead of India. Only thing better than cheap labor is even Cheaper labor.

Catch phrases aren't going to win any points. You should have learned that from liberals by now.

"They recognized that the easiest way to promote unrest was to have unrestricted trade."

What in the hell are you babbling about?

Communists do not believe in free trade between neighbors, and you can't have free trade with a system of government that believes in the State controlling industry.

If your theory was right, then why in the world would anarchists and communists be marching against free trade all over the world?

The theories which I allude to have been addressed on countless threads in the past months. They saw free trade as a good resource through which to cause civil unrest due to the displacement and disowning of people's jobs through unfair advantage. The civil unrest was considered on the one hand to be a perfect motivator toward revolution, if I remember the statements correctly; BUT, could also be counter productive in that the extent of the revolution may not be controllable once started. I think the proper metaphor to this would be the proverbial pandora's box. You have been present, I believe, on the threads in which this has been discussed. If you have not, I'm sorry, it makes it no less apprapo or true. I don't happen to have memorized it as living the situation is testimony enough to it's truth without having to quote someone about it. Sorry for not having someone to quote about the unrest I feel at the moment.

"...displacement and disowning of people's jobs through unfair advantage..."

Therein lies the fault in your thinking.

The jobs do not belong to the people, at least not in the sort of system we are supposed to live under.

That's unfortunate, but it is nevertheless a fact.

The fact that the communists claim that free trade is the worst thing that could happen to a nation is not surprising; would you actually expect them to admit that our system of government and trade is better than theirs?

Yes, the fault of my thinking - that it is my job if I possess it - do the work, exceed expectations, ect. It's my fault for expecting to keep a job for following the rules of the game. The rules changed and the deck was stacked against me. I couldn't even compete to keep my job.
If I had, the rate it would have paid staying here would be less than a Walmart income. I don't have much; but, I can't live on a walmart income and have a house. I've worked for Walmart and was doing good to make 700 a month.
Those jobs are what's left here. I don't drive. My government sold my job out to the Mexicans. Where am I gonna go? I have a house I'm bound to for minimum 2 more years. I know you don't care. People is the last thing you care about. And caring is more than some comfy sounding words. I'm not asking for special treatment - I'm asking for the government to stop pulling the rug out from under me every time I get a little ahead! I get a raise, my taxes go up and I take home less money than before the raise. I get a new job, they give it to the Mexicans. What's next - cut my arms off then tell me I've been hired by the Cubs?! I'm sure you guys will be compassionate then.

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