NYT - It Just Got Even Worse
NYT - It Just Got Even Worse
Date: Monday, June 02, 2003 2:44 PM
JOB DESTRUCTION NEWSLETTER
You might wonder if the New York Times could get worse than the last
article. They can and did.
The NYT should have had a disclaimer that the article will contain
totally self-serving propaganda on the virtues of globalism. Of course
disclaimers of this type could only be expected from newspapers that
have journalistic ethics.
Observe that the first sentence says Inductis is in New Providence.
They conveniently left off the information that appeared today on a
newswire that said:
Inductis has offices in New Providence, New Jersey;
New York City;
and New Delhi, India.
For more information please visit http://www.inductis.com
Oh, and just in case you are wondering, Inductis is in the LCA database
because they hire H-1Bs.
The New York Times, June 1, 2003
Copyright 2003 The New York Times Company
Section 14NJ; Page 15; Column 1; New Jersey Weekly Desk
Why Ban Offshore Services?
By ARJUN SAXENA and DOUGLAS LAVIN; Arjun Saxena and Douglas Lavin are
consultants at Inductis, a strategy consulting firm in New Providence.
THE state senate recently passed a bill to prohibit the state
government from contracting with foreigners to perform services.
Maryland, Missouri, Wisconsin and Connecticut are contemplating similar
legislation. Long on sentiment but short on sense, such bills deprive
states of a powerful tool for saving money and undermine their
The New Jersey bill materialized after a contractor hired by the state
to manage a welfare and food-stamp program moved its customer-service
operations to Bombay from Wisconsin to cut costs. The grandstanding
began almost immediately.
"We shouldn't be sending taxpayer-funded jobs for state contracts to
foreign countries when our citizens need work." said Senator Shirley
Turner, a Mercer Democrat who introduced the bill.
Never mind that the jobs were not based in New Jersey in the first
place. After a member of Congress, Representative Thomas M. Barrett of
Wisconsin, asked the federal government to look into the situation, the
health and human services secretary, Tommy G. Thompson, tactfully
replied that although the practice of sending work offshore made him
uneasy, it lay
outside the jurisdiction of the federal government.
But since when does buying from foreigners make America uneasy? Tell
that to the Toyota assembly workers in Kentucky and the Honda employees
Consider the private sector. GE Capital and American Express together
are said to be saving more than $450 million a year by using offshore
outsourcing of services. For the banking industry, reports say that
outsourcing to India has resulted in $8 billion in savings over the
last four years. With some 82,000 employees, and an annual budget of
nearly $24 billion, New Jersey could achieve similar savings if it
undertook even a modest offshore initiative. With the savings, the
state could increase education and job training programs or, if it is
really concerned about economic development, lower taxes on business.
Innovative governments are catching on. The Greater London Authority
awarded a $10 million contract to an offshore software company, Mastek,
to develop the software and run the back-end of the radical new program
in London that charges tolls for driving within the city during rush
hours. Data show that buying services offshore saved the city $4
million to $5
Efforts to stop local government from buying abroad run afoul of
numerous commitments made by the United States in such accords as the
General Agreement on Tariffs and Trade, or GATT, and Nafta, the North
American Free Trade Agreement. And they run counter to national policy.
For more than a decade, the United States has been preaching
liberalization of trade in
services, adopting policy to force countries to allow American banks
and insurance companies to operate abroad.
That is because services is an American strength.
Instead of trying to stop market forces by legislative fiat, New Jersey
should take a cue from some of the companies that are based in the
The telecommunications companies Lucent, AT&T and IDT are investing to
advantage of a simple economic fact: services can be imported and
over phone lines just as easily as goods can be shipped by boat.
What's next? Will New Jersey outlaw purchases of computers and cars
that are made offshore?
Because most products are no longer pure goods or services anyway,
enforcing the law could require some strenuous exercises in
metaphysics. As much as 60 percent of the value in an average desktop
computer is represented by software. That includes driver software
produced in Taiwan, the soft component of memory chips designed by
Korean technicians and Windows, some of which is produced by Microsoft
What state governments need is not naive legislation, but cost-saving
The 50 states face budget shortfalls of $29 billion in the current
fiscal year. Bills like New Jersey's certainly won't help close the
gaps. In fact, such bills benefit no one: not poor people, workers,
taxpayers or state economies that, like it or not, are deeply enmeshed
in global trends in technology and trade. Choosing political
grandstanding over sound economics
does, however, ensure that states will pay above-market rates for
NEW PROVIDENCE, N.J., June 2 /PRNewswire/ -- Globalization experts at
Inductis, the strategy consulting firm, say that laws forbidding state
governments from contracting with offshore companies for services would
deprive states of a powerful tool for saving money and undermine their
In an analysis published yesterday in the New York Times, Arjun
Saxena and Douglas Lavin, members of Inductis' leadership team, say
that emotion rather than sound economics drives legislation being
considered in Connecticut, Maryland, Missouri, New Jersey, Washington,
"Sending American jobs offshore raises red flags with state
legislators," says Saxena. "But instead of trying to swim against the
tide of globalization, states should be finding ways to use outsourcing
to save taxpayer money that could then be spent to improve job training
or encourage job creation."
The issue first surfaced when New Jersey lawmakers discovered that
a contractor hired by the state to manage a welfare and food-stamp
program moved its customer service operations from Wisconsin to Bombay
to cut costs. The New Jersey State Senate then unanimously approved a
bill requiring that workers hired to perform services under state
contracts be American citizens or legal aliens. The bill currently
awaits passage by the New Jersey state assembly.
"The bill attempts to legislate away the very economic trends that
are vital to the state's economic base," says Lavin, co-author of the
article. "The revenues of Lucent and AT&T, headquartered in New Jersey,
are driven by the same global trends driving offshore outsourcing:
rapid advances in information technology, regulatory reforms in
developing countries, and a convergence of international accounting and
The authors point out that the offshoring of services saves
American Express and G.E. Capital more than $450 million annually. In
the past four years, outsourcing to India has saved the banking
industry $8 billion.
"In helping Fortune 500 companies take services offshore, we've
seen cost centers of $250 million cuts costs by 30 - 55 percent." says
Saxena. "State governments now face enormous budget shortfalls. They
would do well to emulate the private sector."
The restrictive legislation also runs afoul of international trade
agreements, including the GATT and NAFTA accords, say the authors.
"The intent of those accords is to help spread prosperity," says
Lavin. "What protectionist legislators overlook is that offshore
services, used intelligently, increase domestic productivity and
ultimately lead to the creation of more high-wage jobs at home."
for clients through the application of leading-edge strategy and
Inductis is a global management consulting firm that creates value
technology. Areas of expertise include rigorous business planning for
bottom-line impact, advanced data analytics, global resource
optimization, and innovative technology services. Inductis helps global
Fortune 500 clients rethink what businesses they want to be in, enhance
customer relationships, and improve profitability. Since its founding
three years ago, Inductis' revenues have tripled. Inductis has offices
in New Providence, New Jersey; New York City;
and New Delhi, India. For more information please visit
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