Report: Global Outsourcing Helps Software And Services Industry

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March 30, 2004 (9:43 AM EST)

Report: Global Outsourcing Helps Software And Services Industry

The outsourcing of software and services to foreign lands "makes good economic sense" and eventually leads to the creation of jobs in the U.S., according to a report released Tuesday by an industry group.

"While global IT software and service outsourcing displaces some IT workers, total employment in the United States increases as the benefits ripple through the economy," the report by Global Insight states. "The incremental economic activity that follows offshore IT outsourcing created over 90,000 net new jobs in 2003, and is expected to create 317,000 net new jobs in 2008."

The Information Technology Association of America (ATAA), an industry trade association, conducted the report. ATAA vice president Bob Cohen said in an interview: "We're already seeing benefits. Basically, companies gain cost advantages that translate into price advantages. It's a very positive situation."

The report findings were immediately criticized by experts on the other side of the issue--those who believe the flow of jobs by outsourcing is leading to a permanent downsizing of the U.S. software and services market. Lee Price, research director at the Economic Policy Institute, said in a statement that U.S. software jobs have been falling since 2000, despite the gain of software sales being up by four percent during that time.

Cohen, however, said the report should be viewed over a time period long enough for benefits to be seen. He cited benefits to free trade and to the global marketplace--often looked upon as helping the U.S. economy over time.

The Global Insight report maintains that 516,000 jobs would be created over the next five years in a global-sourcing environment, but only 490,000 without it. "Of these 516,000 new jobs, 272,000 will go offshore and 244,000 will remain onshore," the report states.

The report also claims the software and services outsourcing phenomenon leads to an increase in wages for U. S. workers, too. The reported added: "The benefits of free trade--lower costs, higher labor productivity, and more efficient production--induce businesses to leverage the offshore resources."