Ohio State Governor Ted Strickland has banned outsourcing of government Information Technology and back-office projects to India by government departments. Is this protectionist measure worth the cost of alienating Indian companies whose businesses are heavily dependent on the American economy? Is this a thoughtful approach to dealing with a struggling state economy, or is it merely partisan politics?
Stickland believes that outsourcing IT jobs to India undermines economic development in the state of Ohio, has security risks and has bad impact on the local businesses. Running behind in opinion polls ahead of gubernatorial elections in November, Governor Strickland, a democrat, issued the executive order banning outsourcing last week, arguing that this undermines economic development and has unacceptable business consequences for his state. “Outsourcing jobs does not reflect Ohio values,” Strickland said in a statement after he signed the executive order.
Strickland Protecting Ohio – Good Business or Politicking?
The Indian IT sector has declared this decision as discriminatory and said it is a trade barrier. The Indian IT sector gets 60% of its export revenue from the US. Indian IT giants like Infosys, TCS have expressed concern over this decision. This move comes on the heals of the latest Congressional measure signed into law by President Obama increasing H-1B visa fees to $2,000 for certain Indian companies operating in the states. Indian companies feel that Strickland’s order coupled with the Congressional legislation discriminates against them without proper justification. Moreover, the governor’s executive order could have deep ramifications as other states may follow suit. With a lagging U.S. economy, protectionist measures such as this are welcomed by the states who seek to benefit from “closing” their borders to foreign outsourcing. It is a delicate balancing act – protecting the interests of local residents while maintaining important relationships with foreign companies.
Since Strickland is so far behind the Republican opponent, John Kasich, many see this as mere posturing before an election. “We are concerned with the recent news from US about banning offshore outsourcing by Ohio State government departments. Infosys’ initiative in the Public Services sector is focused on creating a domestic Delivery Center in the US hence this should not be affected.” Infosys CEO & Managing Director Kris Gopalakrishnan.
As America continues to rebound from the heals of the great recession, it must seek thoughtful approaches to economic growth. States such as Ohio who have been hit hard by the recession and whose manufacturing and service sectors have suffered see measures such as Strickland’s as positive news. However, Indian companies see it as mere politicking. What is important are the facts. The Congressional law raising H-1B fees will price out many Indian companies from hiring Indian workers who fill an employment gap in the U.S. These workers do not replace qualified U.S. workers; they fill a void where there are none. Banning outsourcing to India has a similar effect.