What's your opinion on Obama's anti-outsourcing policy?

Discussion in 'Website Development & Design' started by Cosoft, May 27, 2009.

  1. Cosoft

    Cosoft
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    Recently, President Barack Obama had announced new proposals to end tax breaks for American companies that outsource jobs offshore. These policies aimed at preventing job losses within U.S. But according to Mann (2003) because of offshore outsourcing United State’s GDP had experienced an additional growth of $230 billion between 1999 and 2007”. Using the IT hardware industry as an example, Mann (2003) expects the offshore outsourcing of business process services to also lower prices to the consumer, making business-specific packages more affordable and leads to higher productivity among U.S. workers. Also, Theory of Comparative Advantage can explain why outsourcing is prevalent now.

    Is offshore outsourcing propelling or draining on the U.S. economy? Is outsourcing the root cause accounting for job losses in America? What’s your opinion on offshore outsourcing?

    Please feel free to leave a comment or contact me directly atcontact(at)co-soft(dot)net

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  2. Nazreen

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    Welcome to the Business Advice Forum Cosoft.

    My husband works for an IT outsourcing company but that's not the only reason why I'm in favor of outsourcing. I guess that the main reason why companies outsource would be to reduce cost. If the Obama administration will pass a law against outsourcing, then I'm afraid that more companies will go under especially during the recession.
     
  3. Fergal

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    Outsourcing is a good thing, but I do agree that it does have to be controlled in order to prevent a country from losing too much of its tax revenue. US based companies obviously face stiff competition from companies based outside of the US. If the US government imposes major restrictions on outsourcing, US companies will lose some of their competitive advantage.
     
  4. ZakShow

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    That's well said, I totally agree with you Fergal in that point :)
     
  5. nichewitch

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    This is most likely not going to be a popular opinion but the companies wouldn't have felt the need to do all this outsourcing had the unions not become greedy and many Americans too lazy to do the work. Not in the case of IT, but with the shoe industry and other industries that have pretty much vanished from our country. Unions were a good thing and necessary at one time but most have become so greedy and demanding that companies can't keep up with it.
     
  6. Fergal

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    Ireland has actually benefited from these changes in the US. Accenture is moving its place of incorporation from Bermuda to Ireland. My understanding is that this move was prompted at least in part by less favorable tax treatment of profits coming from Bermuda. The move will result in the creation of approx. 10 high quality jobs in Ireland. Hopefully there will be more to follow.
     
  7. simplyjo

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    Well, I work for IBM - One of the major leaders in outsourcing. When my co outsourced to IBM, I was furious, to say the least... However, To increase quality and decrease costs, this was the most viable solution for my co. to stay afloat. So, Obama's bill 'might' be helpful for few but overall would have a negative impact on the economy.
     
  8. pendelton

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    Another thing to think about is that the prices really haven't gone down, since the moves of jobs overseas was not prompted to keep prices lower, but to keep them the same and have more profit for the company leaderships and stockholders.

    Not taking this part of the equation in to perspective leads to disinformation that skews and possible outcome or answer.
     
  9. Kay

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    If he doesn't want the companies to outsource, then he has to offer a homegrown affordable alternative. What's the point in keeping your business in the US if the costs make any continued growth prohibitive? Instead of penalizing those who go offshore, he should increase the benefits for those who don't. There's a subtle difference there. Penalizing them puts them more at risk of shutting down entirely. Keeping it as it is doesn't and giving more breaks to encourage those who don't go overseas would be better.

    You can't fault companies for wanting to maximize profits when they have shareholders to answer to. I doubt many shareholders would accept halving their dividends in return for keeping the business operations on home shores. Most only care about the bottom line and don't give a second thought to the bigger picture.
     
  10. Fergal

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    I've no doubt that the primary reasons companies outsource is to increase their profits. However, I'd say that there are some examples of where outsourcing has resulted in lower prices for consumers.

    For example if Dell were to produce all their laptops in the US, they would find it very difficult to compete on price with companies that produce in Asia. Increased competition from Asian producers together with US producers outsourcing production has made at least a partial contribution to falling prices for consumers.

    Ireland previously had a number of companies who produced promotional goods for businesses (e.g. promotional pens with company logos). Irish promotional goods responded to lower cost competition from producers in China by themselves sourcing products in China. The Irish companies, thus changed their business model from being manufacturers to becoming marketing and distribution companies for products sourced in China.

    If they were prevented from outsourcing production to China, they would have went out of business. Unless of course the Irish government protected them by banning imports from China or by imposing very heavy taxes on Chinese imports.

    Kay I do like the idea behind that. However, would it still not have the net effect of penalizing the outsourcing companies? As you say these companies focus on the bottom line and cold hard financials, if they can't avail of certain tax breaks by going offshore would they not simply consider this as a cost of outsourcing?

    Jo, you say that you work for IBM and then that your company outsourced to IBM. Did IBM acquire your company?
     
  11. Nazreen

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    I also think that outsourcing should not be stopped completely but be controlled. Just like US jobs that are given to foreign immigrants, like nurses and IT related jobs; the US have put a quota on how many foreigners will be allowed to have H-1b visas. I think that this should also be done for American companies who outsource to other countries. There should be a limit/quota so that there will still be jobs left for Americans.

    I read an article before about Americans complaining about nursing and IT jobs being given to immigrants - Indian, Filipino, Chinese, etc. This, in my opinion, is almost the same as this issue.
     

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