Obama’s Re-election and the Future of Outsourcing
With the re-election of US President Barack Obama last week, it remains to be seen what the practical fallout of the anti-outsourcing rhetoric heard on the campaign trail will be
Nov 13, 2012
With the re-election of US President Barack Obama last week, it remains to be seen what the practical fallout of the anti-outsourcing rhetoric heard on the campaign trail will be. To gauge the reaction of the Russian software development industry to the news, we asked several of the countries most prominent businessmen what their thoughts were on the matter.
"The fact that the America re-elected the sitting president suggests that, in regards to outsourcing, no significant changes are to be expected. The White House will simply continue to implement its current programs," said Pavel Adylin, CEO of Artezia, a world leading offshore development and consultancy company that has long been one of the top five outsourcing companies in Russia.
What is certain is that US concern over the deficit and job creation will continue. But the fact remains that outsourcing is here to stay.
"During any election campaign, Mr. Adylin continued, "politicians are likely to say what voters want to hear. But in practice, not all of the promises are kept. It is also worth remembering that in the US, the decision to outsource is taken by business, rather than being dictated by policy. Therefore, the administration would have to offer a serious alternative to outsourcing based on tax benefits for those companies that cease to outsource jobs, which seems unlikely."
While at first glance, the president’s re-election may not seem to be the best news for the IT outsourcing industry, it is a major victory for the kind of international relationship building that will serve global business in a much wider sense.
"The election of President Obama for another term is not only a positive development for the US economy and the future of the country, but also a positive factor for the improvement of Russian-American relations," said Alexis Sukharev, founder of Auriga, one of the oldest and most experienced American-Russian offshore software development firms.
It should also be noted that most of the animosity against outsourcing has been directed towards the loss of manufacturing and call center jobs rather than R&D, or other innovation areas. In addition, no specific mention of Russia was made in campaign materials attacking former candidate Mitt Romney on his company’s outsourcing practices.
"I don’t think that most people in the Russian software industry were affected by Obama's anti-outsourcing rhetoric during his re-election campaign. Cooperation will continue simply because it is mutually beneficial, said Arkady Khotin, Russian software entrepreneur with multiple businesses in Russia and Nordic countries, interested in outsourcing, offshoring and startups.
Most of President Obama’s policy as regards outsourcing is simply not to encourage US companies to send jobs overseas with tax incentives.
"If indeed there is a change in the tax legislation, then again, it is unlikely this will affect our business," said Mr. Sukharev.
Regardless of the availability of incentives, however, IT jobs will continue to be outsourced to places where highly-skilled labor is available for less than at home. While this may have an immediate and direct impact on markets like India, Russia is secure in its position as one of the world’s powerhouses of extremely knowledgeable and highly-trained IT talent.
"It is mostly large Indian IT providers which will suffer from the new policy on outsourcing that Obama's second-term cabinet may try to impose," said Alexander Egorov, CEO of Reksoft.
"But the top ten India-based IT outsourcing companies had already – even before the results of the election were known – been feeling the pressure of the US government’s tightening of rules for bringing skilled IT workers to the country. Indian companies do try to fight back and expand their existing facilities in the country to demonstrate their willingness to attract local talent as well. But the tension remains.
"To give an example – just last Thursday one of the largest Indian ITO suppliers put off hiring 13,000 new staff who had already received job offers because of uncertainty over the future of their outsourcing business in the States (which is the major market for Indian ITO services).
"I do not think, however, that the Russian software outsourcing sector will notice any difference in attitude towards its services post-election. Although there are successful examples of outsourcing cooperation between Russian and US companies, none are of a size which may be comparable to business of our Asian competitors in North America. On the other hand, it is the client who ultimately decides in which direction to go, and they will most probably turn to outsourcing if they can not find the labor supply on the home market.
"Besides, it is my opinion that the focus on the election has overshadowed a few important economic issues on the horizon which may lead to significant federal spending cuts and tax increases in the US in 2013."
How the next few months play out – with power divided between the two ruling parties in the US House and Senate – remains to be seen. Only time will tell if more pressing matters grab the spotlight away from the evils of outsourcing.
"The fact that the America re-elected the sitting president suggests that, in regards to outsourcing, no significant changes are to be expected. The White House will simply continue to implement its current programs," said Pavel Adylin, CEO of Artezia, a world leading offshore development and consultancy company that has long been one of the top five outsourcing companies in Russia.
What is certain is that US concern over the deficit and job creation will continue. But the fact remains that outsourcing is here to stay.
"During any election campaign, Mr. Adylin continued, "politicians are likely to say what voters want to hear. But in practice, not all of the promises are kept. It is also worth remembering that in the US, the decision to outsource is taken by business, rather than being dictated by policy. Therefore, the administration would have to offer a serious alternative to outsourcing based on tax benefits for those companies that cease to outsource jobs, which seems unlikely."
While at first glance, the president’s re-election may not seem to be the best news for the IT outsourcing industry, it is a major victory for the kind of international relationship building that will serve global business in a much wider sense.
"The election of President Obama for another term is not only a positive development for the US economy and the future of the country, but also a positive factor for the improvement of Russian-American relations," said Alexis Sukharev, founder of Auriga, one of the oldest and most experienced American-Russian offshore software development firms.
It should also be noted that most of the animosity against outsourcing has been directed towards the loss of manufacturing and call center jobs rather than R&D, or other innovation areas. In addition, no specific mention of Russia was made in campaign materials attacking former candidate Mitt Romney on his company’s outsourcing practices.
"I don’t think that most people in the Russian software industry were affected by Obama's anti-outsourcing rhetoric during his re-election campaign. Cooperation will continue simply because it is mutually beneficial, said Arkady Khotin, Russian software entrepreneur with multiple businesses in Russia and Nordic countries, interested in outsourcing, offshoring and startups.
Most of President Obama’s policy as regards outsourcing is simply not to encourage US companies to send jobs overseas with tax incentives.
"If indeed there is a change in the tax legislation, then again, it is unlikely this will affect our business," said Mr. Sukharev.
Regardless of the availability of incentives, however, IT jobs will continue to be outsourced to places where highly-skilled labor is available for less than at home. While this may have an immediate and direct impact on markets like India, Russia is secure in its position as one of the world’s powerhouses of extremely knowledgeable and highly-trained IT talent.
"It is mostly large Indian IT providers which will suffer from the new policy on outsourcing that Obama's second-term cabinet may try to impose," said Alexander Egorov, CEO of Reksoft.
"But the top ten India-based IT outsourcing companies had already – even before the results of the election were known – been feeling the pressure of the US government’s tightening of rules for bringing skilled IT workers to the country. Indian companies do try to fight back and expand their existing facilities in the country to demonstrate their willingness to attract local talent as well. But the tension remains.
"To give an example – just last Thursday one of the largest Indian ITO suppliers put off hiring 13,000 new staff who had already received job offers because of uncertainty over the future of their outsourcing business in the States (which is the major market for Indian ITO services).
"I do not think, however, that the Russian software outsourcing sector will notice any difference in attitude towards its services post-election. Although there are successful examples of outsourcing cooperation between Russian and US companies, none are of a size which may be comparable to business of our Asian competitors in North America. On the other hand, it is the client who ultimately decides in which direction to go, and they will most probably turn to outsourcing if they can not find the labor supply on the home market.
"Besides, it is my opinion that the focus on the election has overshadowed a few important economic issues on the horizon which may lead to significant federal spending cuts and tax increases in the US in 2013."
How the next few months play out – with power divided between the two ruling parties in the US House and Senate – remains to be seen. Only time will tell if more pressing matters grab the spotlight away from the evils of outsourcing.