Can anti-offshoring legislation really help?

Can anti-offshoring legislation really help?

Summary: As a result of our government's attempts to keep nature from running its course, I have a new motto: The bigger they regulate, the harder they fall. I was reminded by this InfoWorld story that it isn't just the Federal government that's trying to use legislation to keep a lid on offshoring.

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TOPICS: Outsourcing
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As a result of our government's attempts to keep nature from running its course, I have a new motto: The bigger they regulate, the harder they fall. I was reminded by this InfoWorld story that it isn't just the Federal government that's trying to use legislation to keep a lid on offshoring.  The states are involved too.  According to the story's author Nancy Weil:

Bills attempting to stymie the outsourcing of American jobs were introduced this year in nearly all 50 states, as well as in the U.S. Congress, and there is no indication that the legislative trend will stop......Of the bills that have actually become laws, most seem to lack teeth and in some cases have had negative consequences by costing states millions of dollars more to pay for contracts with call centers in the United States rather than in other countries.

In the bigger picture, I find this sort of regulation to be laughable.  Arranging this sort of artificial protection from the inevitable for specific sectors sets those sectors up for a much more devastating fall off the cliff. The government is doing the same sort of thing for telcos by trying to re-intermediate the Baby Bells into the loop of Internet telephony.  But, much the same way that nature has a way of eventually beating our medications, innovation has a way of working around regulation and the telcos are about to be devoured by the sort of high speed wireless broadband (eg: WiMax) that bypasses their government-granted right of way (also, see Dan Gillmor's Telco's Attacking the Open Web). What's next? Will the government begin to regulate bandwidth in supposedly the unregulated spectrum space? Uncle Sam is like the Dutch boy at the leaky dam.  Just when he plugs one hole, another one springs a leak.  

One net effect (no pun intended) when certain businesses are given this sort of jury-rigged protection is that they lack the motivation to really innovate their way out of the 6-foot deep hole they're about to be buried alive in.  Back to the Dutch boy at the dam: at some point, the configuration of holes becomes incompatible with the anatomy of the hole-plugger and the dam gives way in an instant, irrecoverably dragging employees, stockholders, politicians, lobbyists, and customers into the hole that someone swore couldn't be dug.  Oh, and miraculously (not!), the dirt mound sitting beside the hole falls right into place.

Don't get me wrong.  When it comes to outsourcing, I'm very sympathetic to the today's suffrage.  But, history proves that adaptation is a much healthier long term approach to changing business models and real economic force than is legislating the erection of highly questionable artificial protections whose benefits are short term at best.  I don't profess to have the answers either.  But, at a recent New England TechNet dinner that I attended, Brian Keane, the chief executive of IT consultancy Keane & Co. noted that he is hiring in India and that his ability to do so was making it possible to create more jobs here in the US. His comments drew nods of concurrence from other chief executives at the table including RSA president and CEO Arthur Coviello. 

During that dinner, we talked about long term outsourcing trends and discussed how innovation in information technology is what helped the US come up with a substitute for all the manufacturing that's been offshored over the last century.  But, when it came to answering the question of what stood a chance of being that substitute for IT should IT ever get offshored to the extent that manufacturing is, there were no clear answers. This is particularly so since IT's ability to take over where manufacturing left off was largely based on intellectual property that was protectable on an international level for a variety of reasons (one of which was lack of a scalable conduit like the Internet through which trade secrets are easily leaked). 

Not only is some of the development of US IP being moved offshore, it's not clear whether the replacement for IT (as a significant local contributor to the US gross domestic product) will be able to enjoy the sort of IP protection that both manufacturing and IT have historically enjoyed.  Paul Denniger, CEO of Broadview Holdings in Waltham, and co-chair of TechNet New England, suggested that alternative fuel or nanotech could be the next industries to get in line behind manufacturing and IT.  The comment caused me to openly lament the short-sightedness of the Nixon and Ford administrations to use politics rather than innovation (with the encouragement of big oil, of course) to manage the US's way out of the 1972 oil crisis.  I agree that alternative fuel would have been a great industry -- one that had it been mandated in the 70's much the way Kennedy mandated the space program in the 60's -- would have been well underway right now, yielding significant benefits (not the least of which might be improved national security). That crisis should have been a clarion call heard by all.  This of course raises the question:  Now that we may have missed the window of opportunity on alternative energy, what *is* the clarion call of today?

Topic: Outsourcing

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  • Do those bills propose to stop outsourcing both ways?

    Remember that some of the biggest employers in our country is Toyota and Honda. In some states, they're the biggest employers. Outsourcing cuts both ways.
    george_ou
    • The biggest outsourcer of all is the US Government

      I'm not against outsourcing, but the US Government could
      control its own outsourcing. Also, things could be done to keep
      jobs here, like ensuring that our infrastructure is the best in the
      world. Labor might be cheap in India, but their highways,
      electrical service, up until recently, high speed internet access,
      and other conditions are deplorable. Our government needs to
      take a big look in the mirror and look at what we can do to make
      the business climate here better. We need to focus our resources
      on making education less expensive and better. We need to
      focus on what can be done here to make moving jobs overseas
      less attractive and creating new jobs here more attracive. I'm not
      talking about building 5000 new Wal-Marts either.
      MacGeek2121
  • Start With IT Journalists and CEOs

    I say start with outsourcing IT journalist and CEOs and let's see how sympathetic these demographics become regarding the latest round of anti-offshoring legistlation.

    David, did you happen to ask Brian Keane for specific numbers of how many Indian vs. U.S. jobs his company has created / eliminated over the last five years? Something tells me there would be a significant imbalance between the numbers of jobs created and eliminated between the two countries by Keane.

    I laugh every time I hear prognostigating guru's say nano technology may well swoop in to save the day. That's BS. First and foremost nano technology, by its very nature, suggests super hightech, meaning highly automated. Highly automated means highly productive, meaning not a lot of jobs, when compared to the number of IT jobs being displaced by offshoring, mergers, general productivity gains, and a move towards less reliance on IP in the software industry.

    It's even double laughable to hear all the big tech giants / CEOs stand up and talk about how the U.S. stands to be passed by in areas of science, math, and technology due to reduced enrollment in degree programs in these areas of study. Of course we're going to get passed by. America is 'slowly' moving towards a service / retail industry. Granted, we might not get passed by in specific areas for 50 years, but we stand to loose a ton of IT, manufacturing and a host of other back-office / knowledge worker jobs to offshoring during that same period.

    The fact of the matter is that they all offshore, becuase everyone else is doing it; and when done right, it saves money, for the company that is. In about 30 years while Berlind is writing his IT op-ed pieces about how he was so wrong about DRM in semi-retirement, he'll be asking the same thing? What's going to replace all those really good paying jobs we're loosing to offshoring, mergers, and general productivity gains?
    jjworleyeoe
  • Can it help? Not really, at least not the way it's being done.

    Instead of barriers to trade the answer is in promotion of America and Americans. How to do that?

    1. End corporate welfare at the American tax payers expense. When a company like IBM makes $3.2 billion in *profit* AND gets a tax refund, something is horribly wrong with the system. When IBM is allowed to simply skate away from owning American workers $6 billion (their estimate) some thing is VERY wrong.

    2. Global pollution is affecting everyone. When corps decide to manufacture offshore to get around US pollution control requirements, the companies they do business with should be required to meet the same requirements or their products not allowed to enter the country. (If we can afford to pay a bit higher price to reduce pollution, so can others.)

    3. Eliminate corporate "campaign donations" to political animals. Take away the incentive to screw the American people and force them to actually work for the people that elected them. Nuff said !!!

    4. Throw out the existing public school system and start over from scratch. Tenure and Unions do not make good teachers or administrators. Force the educators to be accountable for the success of the student. Get the gangs out of the schools. Raise the pay for teachers that are worth the money and fire those that are not. Four years of higher education should be the right of every child, not just the privileged.

    5. Stop trying to be the world's cop and reduce our armed forces to the level required to "protect" America, not the world. Put the money into education and public health instead. Folks, the US does NOT need a new fighter plane!

    6. Make micro-loans available to entrepreneurs in the US. (Completely scrap the SBA and it's bull crap paperwork and regulations.) You would be amazed what a $5000 or $10,000 loan can do when the person is motivated.

    7. End the corporate farm subsidy programs. Last year 50% of all farm income was via one form of support/welfare or another and 85% of that money went to corporations. Put an end to it.

    8. Place a real limit on how big a corporation can be. Forget all the fancy (and useless) foot work that anti-trust brings us and set some real and hard limits. In other words promote real competition.

    9. Corporations that are US registered should pay taxes to the US for any and all operations outside the US. If I work offshore you can bet I still have to pay taxes, there is no reason the corps should get a free ride either.

    10. Require CLEAR and PROMINENT labels on anything not made in the US so the consumer can make an informed choice. If some thing is put together (most things are) in the US but manufactured else where, CLEARLY state what percentage is "American Made". And allow NO LOOP HOLES to anyone!


    Hey, it's a start...
    No_Ax_to_Grind
    • Nice Write Up No Axe

      How about this for #11:

      Get rid of Wal-mart, a company who epitomizes what's wrong with this country.

      Just so I'm clear, my previous post is not intended to endorse the anti-legistlation, but rather that the big cats and corporations at the top need to feel the pain.
      jjworleyeoe
      • I agree, I forbid my family from shopping there.

        Wal-mart has done more to ruin American manufactures than any company in history. The sad part is most have no clue what they are about or how they operate. Again, if 99% of everything they sell said "Made In China" in BIG CLEAR letters it would make a real impact on the American consumer.
        No_Ax_to_Grind
        • Umm...do you *really* know about Walmart?

          They make a point of procuring from American manufacturers when possible, only going overseas when they can't get the goods here. The fact that so much can't be gotten here is not their fault.

          Whether large department stores supplanting small mom-and-pop shops is a separate issue: and if a problem, it pre-dated Walmart by decades. Think Macy's, Sears Roebuck, K-Mart, etc.
          Techboy_z
          • The Problem With Wally World

            Runs much deeper than just sourcing of their products:

            Low wages - Go compare Wal-mart's average wage to Costco. Certainly, each company has a very different business model, but hell for that matter go compare Sam's to Costco in terms of turnover, wages, benefits, etc.

            Low Prices - Sure it's important to keep a lid on prices to maximize profits, but Wal-mart goes to the nth degree.

            Hours Scheduled - One hears story after story of Wal-mart Associates being scheduled just under the amount required to provide them health benefits, etc.

            Size - Wal-mart has probably gotten too big which presents barriers to entry. Go read up on Wal-mart and you'll find that their size tends to depress wages in certain parts of the country.

            Sourcing - Something like 70% of Wal-mart and Target goods are made overseas. Like many of the other items I've listed here, one could write a book on how Wal-mart as a company deals with its suppliers to cut cost and how they in a round about way force companies to send manufacturing over seas.

            And the list could go on and on.
            jjworleyeoe
          • You obviously have no clue on them.

            Please, not trying to be mean here but you are dead wrong about how Wally World works. They have told (and don't deny it at all) US manufactures to fire their employees, close the factory and move their operations to China if they want to do business with them. They have made deals with China (and was caught and fined big time) to dump TVs at below the cost of manufacturing to put the American companies out of business. And finally, Wally World is the NUMBER ONE customer to ALL goods made in China.

            Do a little research on what they did to Tupperware if you want a real eye opener!!!
            No_Ax_to_Grind
    • Lots of interesting ideas but...

      1. Tax code isn't as simple as this. As is international corporation. It's not as simple as a just tax every dollar that they make regardless of how/where they made it. Think about all/any 'local' tax/employment issues that each corporations would have to deal with in different regions/countries. If we are the only company that tax companies that is a US based companies and the other countries doesn't. You're just going to push more companies to escape these legal loopholes. And the small/mid size companies end up with the short end of the stick (again).

      2. I agreed, except now you're going to have to create/deal with some 'large' monitoring agency to see which companies are producing what parts from which country and are they polluting or not (and how much percentage of the total product). Again, I agreed with the principle but how are we going to handle the implementation ?

      3. Completely agreed and I believed more compaign finance law is still in order. However, I would include all the BIG union as well. They're the one that help inflated salary which in turns our product pricing. (Case in point, looked at what happened recently in CA).

      4. Our public school system definitive can used some serious rethinking and retooling. I agreed that we MUST start by paying them with real salary. It's always amazes me that we're paying so little to those that have the BIGGEST impact to our society's future.

      5. With being the ONLY Super Power comes Super responsibilities. History has tell us on what happened during WWI and WWII when we stood by way too late.

      6. I think the Micro-Loan should be more a regional/local level and not the federal level. Where the local community can benefit and monitor how the money is being used.

      7. Prime example of one of the alternative fuel topic: Bio-fuel. Not only is this environmentally friendlier, would also help revive our farming. I for one would think that the Federal Gov should put the money in to put into place a national Bio-Fuel stations (or at least get it started).

      8. Disagreed completely with this. The company's size should be dedicated by its own success/failure in the market place and not by some 'caps'.

      9. If you work off shore, you do get tax credit for tax that you pay to the local region that you 'live-n-make' the salary from. And in most cases, you don't pay state/local taxes like you do now.

      10. Big opportunity for Black/Gray market. How would one be able to create a 'No Loop Holes' when our border is so wide open ?
      JJ_z
      • Further thoughts.

        "1. Tax code isn't as simple as this. As is international corporation. It's not as simple as a just tax every dollar that they make regardless of how/where they made it."

        Ummm, why not? If they are incorporated in say the state of Maine they pay taxes in Maine. Seems simple enough to me. Keep in mind, becoming an international corp is their choice. If it increases the paperwork, that just creates more jobs and opportunities. I see nothing wrong there.

        "2. I agreed, except now you're going to have to create/deal with some 'large' monitoring agency to see which companies are producing what parts from which country and are they polluting or not (and how much percentage of the total product). Again, I agreed with the principle but how are we going to handle the implementation ?"

        What you are suggesting is that it would create more jobs. Umm, that's the whole idea right? But beyond that, if the penalties are harsh enough they won't do it. Let me give an example. Say you have a dozen inspectors, they hit a dozen big retail outlets and pick up half a dozen items to inspect. Now let's say they do it at the local Wal-Mart. Upon inspection they find Wal-Mart is not complying. No fines, no court cases lasting years, simply this. Close your doors for 30 days! Wanna bet they don't do it again?

        "3. Completely agreed and I believed more compaign finance law is still in order. However, I would include all the BIG union as well. They're the one that help inflated salary which in turns our product pricing. (Case in point, looked at what happened recently in CA)."

        I agree completely, end ALL the SIG donations. No exceptions!!!

        "4. Our public school system definitive can used some serious rethinking and retooling. I agreed that we MUST start by paying them with real salary. It's always amazes me that we're paying so little to those that have the BIGGEST impact to our society's future."

        And get rid of the dead wood!

        "6. I think the Micro-Loan should be more a regional/local level and not the federal level. Where the local community can benefit and monitor how the money is being used."

        No argument from me. I've done a lot of reading on micro-loans around the world and their impact has been amazing.

        "7. Prime example of one of the alternative fuel topic: Bio-fuel. Not only is this environmentally friendlier, would also help revive our farming. I for one would think that the Federal Gov should put the money in to put into place a national Bio-Fuel stations (or at least get it started)."

        Heck, I would be thrilled if the US government would just stop sinking every atempt to get away from the use of oil. (See campaign contributions...)

        "8. Disagreed completely with this. The company's size should be dedicated by its own success/failure in the market place and not by some 'caps'."

        Absolute power and all that.... OK, I get a bit worked up on this one but I ask this. Is there not a point where "too much" of anything is bad? I believe there is. Keep in mind how and why corporations were first allowed in the US. The ONLY reason was to create enough "group wealth" to tackle tasks no one person could accomplish. (Specifically railroads.) They had a life duration that was controled by laws and once the goal was reached they were bgroken up. This served the best interests of the country and the American citizen, but did not allow those in power to strengthen their power. Of course that money wasa used instead to buy off legislation to favor those in power and with wealth. (Big surprise not.) Tell me this, name a company (even MS) that would really suffer in anyway by being broken in two. (Other than destroying the power and wealth of the rich.) That is not picking on MS, there are thousands of companies that would meet this test.

        "9. If you work off shore, you do get tax credit for tax that you pay to the local region that you 'live-n-make' the salary from. And in most cases, you don't pay state/local taxes like you do now."

        Yes, *I* do. But corps do not.

        "10. Big opportunity for Black/Gray market. How would one be able to create a 'No Loop Holes' when our border is so wide open ?"

        As I said, creating jobs is not a bad thing here. Supposedly everything coming into the country goes through a port inspection and is subject to tarriffs. Are you suggesting that isn't being done properly? <g>
        No_Ax_to_Grind
    • wow NO_AX what a post

      are you sure that you are ok....
      any fever lately,abuse of any sort food ,alchool,free time .....

      Keep posting like that and ill start sending you canadian beer by mail :)

      Great post i never believe that we could share some politic/economic point of view.

      cheer NO_axe have a cold one .....
      i never thought that i would say that .

      tf
      toxicfreak
      • People assume too much abotu me.

        Often people do not understand that I am not against Microsoft and yet have such ill feeling towards corporations. (Understand my business is in fact a corporation.)

        The truth is, Microsoft is doing exactlly what it was "bred" to do. Let me explain. If I breed a new strain of dog to be highly agressive, territorial, and just plain mean to be a watch dog, I can not then turn around declare the dog is evil, he is exactlly what I created.

        Corps are much the same. In the last few decades we (stockholders) have demanded the biggest possible return on every dollar and that in turn drove corps to be profit generators above all else. Companies that are "lean and mean" and make great profits are applauded by all, until someone stops to understand there is no free lunch and it is costing the whole of society in ways we are just beginning to understand.

        Do I blame the dog for being what he was bred to be? Nope, I blame the breeder...
        No_Ax_to_Grind
        • Dog good analogy

          True, the dog is not evil, but if it bites someone your neighbors may have it destroyed anyway. You, of course, will just be fined. MS has bitten many, many people over the years. And helped many as well. They are a shade of gray, just as most of us are.
          Aside from that, I agree with your post on almost all points (I think BioFuel is a non-starter, but there are other options). This I find astounding, but I guess there's a first time for everything. Your suggestion of limiting the size of corporations is especially good, but does it stop there? I have come to believe that any organization that gets too large, including governments, will end up as a liability - and they all want to get too big. I think maybe we should split America in 2 as well. We are already a nation divided.
          gregry
    • Good grief!!!

      That's two times I agree with you!!! STOP IT!!!
      Linux User 147560
      • ROFL (nt)

        .
        No_Ax_to_Grind
  • yes it could help

    but the penality must be very hard,and persuasive.
    any compagny that do not fit the rules should remember the penality for ever ....
    a few billion in fine and a few years in jail should be nice .....




    tf
    toxicfreak
    • Unfortunately, the markets have bigger fines

      Even governments can't legislate the laws of economics. Eventually, economics will destroy any inefficient entity, no matter how many laws passed by local idiots say it can't.

      ignoring laws of economics brought down the Soviet Union. Passing laws that enforce inefficiency will may delay changes, but never stop them.
      theoldman59
  • People, people, people! Don't sweat it!

    There's no need to worry so much about this. The world's gonna end in January 2006 anyway. We only have barely a month left. There are more important things to worry about than outsourcing.

    Merry Christmas!
    Techboy
    Techboy_z
  • "sympathetic to the today's suffrage?"

    I am also very sympathetic to the right to vote, but I don't see what it has to do with outsourcing.
    pjpark