a worry familiar to a growing number of jurisdictions: Offshore outsourcing was a viable solution, but what fallout would it trigger?

"The discussions we had centered around the fact that in Austin, there are some people who are unemployed -- like in any other tech city," Ring said. "That was a real issue. It wasn't so much an issue of 'Should we use offshore?' We couldn't find anything wrong with that business model. We saw the benefits of it, and we had confidence it would work.

"We were concerned about the perception that it would create publicly if we did this for the first time," he said. "Now that it's been done, for almost three months there hasn't been any backlash at all."

He said project management staff worried the public would believe Texas was ignoring the local talent pool, despite the fact that the winning vendor offered the best combination of resources and skills, and could meet the agency's schedule and price.

"The bid from ICS came in at $180,000 for all the work," he said. "The next two lowest bids were $2.1 million and $2.4 million. This was about one-tenth of the cost, so how can I justify paying $2.1 million to get this job done? Actually that $2.1 million bid came from a large Fortune 500 company that may or may not use local resources -- and that's most likely since it's not headquartered here and it's not even headquartered in Texas.

"They would fly people in to manage this project, and we still would not be developing any local resources or providing any jobs if we went that direction," he said. "People need to be aware that most Fortune 500 companies are doing this either directly or indirectly to save costs. If a state is going to contract with a Fortune 500 company, there is no guarantee any jobs will be created."

ICS has offices in Dallas, he said. If that wasn't the case, it couldn't have won the contract because of legal issues involved with contracting directly with an Indian company lacking U.S. presence.

Opposite in Indiana

Kernan, of Indiana, took a completely different tack in November 2003. After a series of newspaper stories criticizing a state agency's $15 million contract with a company -- Tata Consultancy Services America (TCS America) -- that used offshore labor, Kernan canceled the contract.

In a statement, Kernan made no bones about the reason for pulling the plug. "As leaders, we have an obligation to build the capacity of our businesses here at home," he said. "The state has a responsibility to purchase a lot of goods and services on behalf of Hoosiers at a low cost, and we also have a responsibility to keep and create jobs here in Indiana. Those two things are not mutually exclusive. We have to marry these different responsibilities, work together across government and business, and take the whole effort to a new level."

That 'new level' is Kernan's Opportunity Indiana program -- announced at the time of the contract cancellation -- designed to examine and reform state government procurement with an eye toward giving Indiana businesses more chances to sell goods and services to the state.

Kernan singled out the contract between the Indiana Department of Workforce Development (DWD) and TCS America to upgrade the DWD's unemployment insurance computer system, saying the way the contract was created and put out for bid prevented Indiana companies from competing for the work.

Horse of a Different Color

From TCS America's perspective, being called an "offshore outsourcing" company misses the point.

"We get characterized as an 'offshore company,' and that's not actually correct," said Jim Thomas, TCS America's vice president of marketing North America. "We are a global company. We

Shane Peterson  |  Associate Editor