October 2, 2006 By Andy Opsahl
In 2003, Indiana approved -- and then canceled -- a contract that intended to send some state work overseas. The controversy set off an anti-globalization scare in legislatures nationwide in 2004, resulting in more than 200 bills proposing to ban or restrict offshore outsourcing in state government, according to the National Association of State Procurement Officials.
All but five bills failed passage into law, largely because many state leaders didn't want to sour relations with foreign countries.
It was a little embarrassing, given that the U.S. largely swore off anti-globalization years ago. I wasn't alive to see protectionism's effect on the auto industry during the 1970s, but I've heard those Ford Pintos were nice. Should we really take a Ford Pinto view of government?
Analysts say virtually every private-sector deal involves at least some offshore outsourcing. The global economy touches most products we purchase. If we allow globalization to bring us better priced food, clothing and appliances, why not let it provide us better priced government functions too?
You rarely hear of other countries outsourcing jobs to the U.S. as we outsource to other countries. Yet direct foreign investment exceeded $487 billion and supported 6.4 million jobs in the U.S. in 2004, according to Jobs, Trade, Sourcing, and the Future of the American Work Force, a U.S. Chamber of Commerce report.
Thomas Siems, senior economist and adviser to the Federal Reserve Bank of Dallas, said offshoring frees up the American work force to do more useful things, growing the economy further and creating more jobs domestically.
Offshoring could evaporate as a critical issue for governments currently implementing a strategy Peter Iannone, president of Avanti Advisory, recommends. These governments are deploying efficiency improvements that lead to lower turnover and too few employees to bother sending overseas. Those efficiencies sharply cut costs, while streamlining government and making it more convenient for citizens. The reduced employee load eventually could shrink any offshore outsourcing effort down to a small portion of the overall savings, Iannone said, and in some cases, make it altogether unnecessary.
He recommends more automation in government, like online car registrations, taxpayer interfaces and many other Web-based "do-it-yourself" services for citizens, and cited New Jersey's automated Department of Motor Vehicles' portal as a model.
Virginia appears to be moving toward Iannone's philosophy with a recently signed IT outsourcing contract with Northrop Grumman, promising to keep jobs in the state, while improving efficiency and cutting costs.
Siems said he prefers government policies open to offshore outsourcing when they offer taxpayers the best deal available, but we both agree that Iannone's argument is the optimal solution, given the current political atmosphere. A nationwide automation craze could finally put the government offshoring debate out of its misery.
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