Analysts Warn Against Anti-Outsourcing Legislation

by Glen Shapiro, LawAndTax-News.com, New York

06 December 2004

According to research recently conducted by analyst firm Frost & Sullivan, attempts by developed countries to introduce laws seeking to restrict the outsourcing of IT and other jobs to lower cost developing countries are likely to fail in their intention, and will decrease the competitiveness of the legislating country.

Using a combination of qualitative information based on primary research in 14 countries together with quantitative data obtained from end-user surveys among IT decision-makers in France, Germany, Hong Kong, Japan, the United States and the United Kingdom, Frost & Sullivan analysts tracked global offshore outsourcing and off-shoring of IT jobs for the period 2002-2004.

According to the study, IT job exports are forecast to increase by a compound annual growth rate (CAGR) of 5.9% 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 United Kingdom and the United States to lower cost countries, amounting to a combined value of USD $51.6 billion.

Frost & Sullivan went on to reveal last week that the United States and Japan are slated to 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 USD $48.22 billion worth of IT jobs since the IT offshoring and outsourcing trend began, and is trailed by the United Kingdom and France.

Speaking with regard to the results of the study, F&S industry analyst Jarad Carleton observed that:

"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."

He went on to add:

"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. 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."

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