Censored Outsourcing Report Is Released

    July 26, 2006
    WebProNews Staff

Google, Yahoo, Microsoft, and other companies were left out of the sanitized version of a report summary that glossed over outsourcing issues.

Censored Outsourcing Report Is Released
How Much Outsourcing Is Actually Being Done?

In October 2005, news of a Commerce Department report that discussed the impact of workforce globalization began to surface after it was learned that a scrubbed 12-page summary of the report, rather than the whole thing, reached a House Congressman.

The Bush Administration has finally released that report after two years of resisting such requests, according to Dr. Norm Matloff, a computer science professor at UC-Davis who follows the outsourcing issue closely. He cited an article at Manufacturing & Technology News (MTN); the publication obtained a copy of the 336-page, $335,000 taxpayer-paid report from Commerce.

Matloff has covered the report’s saga for some time. Although MTN now has the report, an electronic version has not been released yet.

However, pieces of the report referenced by MTN provide a look at how outsourcing has impacted the American tech workforce, and given lie to the belief that the industry in the US desires more American computer science graduates:

“As leading companies locate in or contract with labor in other countries, concerns about the shift of work include fears that higher value work may shift from the United States to other locations, impacting U.S. industrial strength and high-salary employment,” states a passage in the full study that was deleted in the 12-page version. “Layoffs in the United States, especially in the IT sector, have only exacerbated this concern.”

Commerce analysts John Sargent and Carol Ann Meares from the Office of Technology Policy also pointed fingers of blame at the venture capital community in the report, according to MTN:

It states the obvious: that Indian outsourcing companies “are expanding staff annually by the thousands.” The report describes the reasons for the trend including the fact that “venture capitalists are now encouraging U.S. IT start-ups to use lower-cost offshore destinations for software development to reduce the ‘cash burn rate.’ “

The analysts’ boss, Phil Bond, has moved on from Commerce and taken a job on the other side of the outsourcing issue:

Phil Bond, who was in charge of the Technology Administration at the time, said he had nothing to do with re-writing the report. He has since been named president and CEO of the Information Technology Association of America (ITAA), an organization that took the lead in Washington in defending the practice of offshore outsourcing of IT jobs.

Now there is certainly nothing wrong with moving from a government position to one in the private sector. However, Matloff observed in June 2004 that Bond’s position on the need for more IT workers was more in line with the ITAA position at the time, while he was still at Commerce.

Matloff also wrote in a recent email to his outsourcing mailing list that the report might be just as embarrassing to Democrats as it is to the Bush Administration, since it has not been released in an electronic format:

Recall that John Kerry’s bluster against offshoring in the 2004 election turned out to be fake, and that the presumptive Democratic front runner for 2008, Hillary Clinton, is a strong supporter of major offshoring firms such as Tata. (See the files with names beginning with “Kerry” and “Hillary” in http://heather.cs.ucdavis.edu/Archive)

The real embarrassment seems to be what is really happening, and has been happening, to technology workers over the past several years. It’s tough to make the argument that a high school junior or senior should consider a computer science major when greater demand for those skills exists in countries with far lower wages, as paid by their American employers.

UPDATE!: In a follow up email, Dr. Matloff noted that Bond’s replacement as Undersecretary of Commerce is a fellow named Robert Cresanti. Amazingly enough, Cresanti is former Vice President and General Counsel for the ITAA!

Said Matloff: “His duties also include “[serving] as a one-stop-shop for U.S. industry representatives to discuss and resolve critical issues that challenge their ability to thrive.” In other words, the lobbyists come here. That presumably includes the ITAA, now headed by Cresanti’s predecessor at the DOC. How cozy.”

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David Utter is a staff writer for WebProNews covering technology and business.