India Inc.’s  off-shoring and outsourcing sector expressed concerns regarding the US Obama Administration’s certain populist actions and amendments that can be argued as “protectionist” and “anti-outsourcing.”

By ending tax breaks for US companies that farm out jobs overseas, the initiatives towards outsourcing could be curbed but on a whole, cannot be stopped.

In a nutshell , here are the six reasons why:

Outsourcing is a time-proven business strategy

These times, companies look toward to cost-cutting measures in production in order to deal with the challenges of the recession. Off-shoring is one of the most proven survival strategies to optimise production while minimizing costs.

Outsourcing enhances competitiveness

Outsourcing’s role in enhancing the competitiveness of American corporations is widely acknowledged.  Actions to curtail outsourcing can adversely impact the competitiveness of organisations setting up operations in the US.

I agree on both counts however I do think that the recession is more than enough motivation for US companies to enhance their competitive edge. Also, off-shore outsourcing is one of the best options but not only since there are near-shore regions that can offer better alternatives.

As such, companies based in New York and California are looking towards their state neighbors in the Midwest as potential sources for low-cost labor and innovation. Though these locales are leagues away from the professional proficiency found in Mumbai and Manila, near-shoring could be the starter force for change for these US near-shore regions just as much as outsourcing have an agent for change for India.

Large scale concerns

US multinationals’ outsourced projects may be too huge to stop. Many companies have been outsourcing for decades and it is possible that the cost-benefits of continued off-shoring might outweigh the additional taxes payable.

This is also true to a certain degree yet taxes is not the only factor to be considered here. Who knows what will happen in a year’s time or maybe in 5 years? What if the cost-benefits of near-shoring prove to be more than that of continued off-shoring?

Anti-outsourcing can be damaging to US economy and leadership

Outsourcing has led to economic advantage to the US. The “protectionist” policies during the Depression of the 1930s actually delayed America’s revival.  The Obama Administration’s actions to  protect service jobs, and possibly goes on to protecting manufacturing jobs with import tariffs, and a `Buy American’ campaign can only lead the world into similar reactions that will impact global demand for American products.

Again, the recent actions of the US administration could be considered ‘protectionist” but I don’t think the actions are on a permanent-basis. The US is bleeding and it’s just trying to do what it can to heal. I think the Obama administration is more aware than anyone else about this factors that made and break the US Depression. I say let America lick its wounds, do whatever changes it needs to improve education, to improve its consumer culture. The faster this economic world power gets back on its feet, the better it will be for the world economy.

Companies that outsource has no direct tax incentive

Several experts declare there is really no direct tax incentive awarded to US companies who farm out jobs to other countries.  What the US tax code actually has is a decades-old provision that allows US companies to defer income tax payments on offshore profits until they are repatriated back home, and Obama administration wants this to be  eliminated this.

All things considered, the US is about to pass an estimated USD 838 BILLION dollars tax package to stimulate its downing economy. I think the country needs all the taxes it could legally lay its hands on as soon as possible.

Outsourcing is beyond taxes

Outsourcing growth would be difficult to stem. Even if Obama’s tax stimulus plan materializes, the fate of outsourcing is still be a matter of economics, like going to locations where companies can save more.
Thus, there are several considerations for this business strategy to stop in its tracks, not just tax breaks.

This I agree with. Outsourcing is beyond the matter of US tax breaks, in fact it is more beyond than having the US and its companies at the giving end of outsourcing. Trends are shifting where multinationals from around the world, including India are building offices and outsourcing work onto US soil. It’s time for the US to be on the receiving end of outsourcing, and it might prove to be the better for all.

Outsourcing Solutions, Inc. – your outsourcing partner!



“6 reasons outsourcing can’t be stopped .”6 March 2009. India Times – Infotech. Accessed  12 March 2009. Link here


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