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NASSCOM-Evalueserve report on ‘Impact of Global Sourcing on the US Economy, 2003 - 2010’
US to face a labor shortage of 5.6 million workers by 2010. Global Sourcing in the form of offshoring and immigration is imperative to fill this labor gap and protectionism can cost the US economy up to $2 trillion
New Delhi, October 9, 2003: NASSCOM (The National Association of Software and Services Companies), India’s apex body of software and services sector today released its report titled, ‘The Impact of Global Sourcing on the US Economy, 2003 - 2010.’ The report highlights how the US economy will see significant benefits from global sourcing.
Mr. Kiran Karnik, President NASSCOM said, “The report was commissioned by NASSCOM to help understand the impact of information technology and increased globalization on the US economy. A comprehensive analysis of economic parameters such as GDP, productivity and income levels was carried out to arrive at the projections.”
The report outlines the cost-savings and increased flexibility that global sourcing will provide to US companies, thereby keeping them competitive in the global marketplace. Forecasts for the US indicate an annual GDP growth of 3.20%, which will lead to an increased demand for labor. However, the US will face a domestic labor shortfall of 5.6 million by 2010 due to an aging population, which can potentially cost the US economy $ 2 trillion if appropriate measures are not taken well in time.
Evalueserve Inc., a full-service business research firm, interviewed worldwide economists and offshoring experts to produce the 80-page report. Additional information was gathered from statistics and forecasts available with the US Congressional Budget Office (CBO) and the US Bureau of Labor Statistics.
"Frankly, the results are compelling," says Marc Vollenweider, CEO, Evalueserve. "The study clearly shows the necessity of offshore activity to support the growth of the US Economy. The report also found that offshoring keeps US businesses competitive, creates new markets for US goods and services, and fills the shortfall in services labor that the US is expected to face in the next seven years."
- Over the next decade, the US economy will mirror the growth of the 1990s leading to an increased demand for labor. There will be a domestic labor shortfall of approx. 5.6 million workers by 2010 due to slow population growth and an aging population
- If the labor shortfall is not met, the US economy will lose out on growth opportunities resulting in an estimated cumulative loss of $2 trillion by 2010. Global sourcing in the form of immigration, temporary workers and offshoring can overcome this shortfall
- For every $100 of call-center work offshored by US firms, $143 is invested back into the US economy in the form of repatriated profits, increased sales of telecom equipment and cost-savings
- Similarly, the amount invested back into the US economy (for every $100 of work) is $133 for IT services, and $142 for high-end knowledge services like equity research, underwriting, tax preparation and risk management
- Offshoring of IT services has enabled US workers move to specialized and creative roles while moving process oriented programming to offshore locations. The proportion of specialists in the US IT workforce increased from 38% in 1983 to 74% in 2002
- Utilization of offshore facilities results in the growth of the local economies and an increase in the disposable income leading to the expansion of the global market for US goods and services. For example, in India the proportion of the consuming class in the overall population expanded from 14% to 30% in the 1990s and is set to reach 40% in 2006-07. The Indian retail sector is expected to grow from $180 billion in 2003 to $300 billion by 2010
- There will be a short-term impact on the US labor force. About 1.3 million jobs will move offshore between 2003-2010, impacting about 1 million US workers. Of these, about 0.7 million (0.4% of the labor force) will be unemployed for a short duration. Over 8 million jobs are reallocated every quarter in the US economy and hence, the reallocation process will not be a strain for those who are temporarily unemployed
- About 0.3 million workers (0.2% of the workforce) will be unemployed for more than 3 months due to offshoring. This segment will require re-training and redeployment
About Evalueserve
Evalueserve Inc, head quartered in Chappaqua, New York, is a full service business research and intellectual property service firm with over 200 experienced professionals who hold advanced degrees in business and technology. It supports clients in North America, Europe and Asia by providing business and technology research. Services provided include market research, forecasting and modeling, financial analysis, competitive intelligence and competitor benchmarking. Industry verticals covered include financial services, telecommunications, pharmaceuticals and bio-tech, consumer goods and manufacturing. For further information please visit the company website www.evalueserve.com
About NASSCOM
National Association of Software and Service Companies (NASSCOM) is the apex umbrella organization for IT software and service organizations in India. Formed in 1988, NASSCOM's objective is to act as a catalyst for the growth of the globally competitive software-driven IT industry in India. NASSCOM is a non-profit organization with over 800 member companies that collectively contribute to more than 95 per cent of revenues of Indian software industry. Its members include software, Internet and E-commerce companies spanning private, public sectors that include homegrown companies and multi-nationals. NASSCOM is internationally represented at WITSA (World Information Technology Services Alliance) and ASOCIO (Asian Oceanian Computing Industry Organisation). For further information, please visit us at www.nasscom.org
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