Feds, industry mull offshore outsourcing

As American workers face mounting job losses and rising unemployment rates, government and industry officials are struggling with the sensitive issue of offshore outsourcing.

The issue is particularly difficult to address because no one even knows how many American companies have moved tech jobs to foreign countries where labor costs are lower, said Harris Miller, president of the Information Technology Association of America.

"I've heard estimates ranging from 10,000 to 150,000," he said after a panel discussion that ITAA hosted today in Washington, D.C.

The numbers are so widely different that "it's not even a wild guess," Miller said. "The problem is that companies aren't talking." ITAA may commission its own study to try to quantify the extent to which American companies use foreign labor, he said.

The American IT industry has weathered a succession of blows, said Bruce Mehlman, assistant secretary for technology policy at the Commerce Department. The flurry of spending that IT companies had been getting to fix Year 2000 problems withered as the year came and went. The economy began to slump; terrorists attacked the country; the Enron and WorldCom scandals shook the faith of investor; and the United States launched wars in Afghanistan and Iraq, causing more economic caution at home.

As a result, technology companies have had to consider cost-cutting measures more than ever, including foreign labor, Mehlman said. "It's a very real trend driving offshore outsourcing," he said. "There is a lot yet to be understood."

The state of Virginia is still trying to figure out what part of the $900 million it spends on IT should be outsourced, two years into Democratic Gov. Mark Warner's first term, said George Newstrom, Virginia's secretary of technology. Trying to make such decisions carefully is not easy, he said.

"Until we get our arms around it, I don't know what to outsource," he said.

Virginia is trying to discourage companies from leaving the state, especially if the jobs go out of state or to other countries, he said. The government itself should not even think about it, Newstrom added.

"I think the political climate is very adverse for government to say 'We want to outsource work offshore,'" he said. "I don't think there's a politician who could survive to the end of that sentence. We don't even want to outsource to Maryland."