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ITAA/Global Insight Study Finds Global Outsourcing Spurs U.S. Economy
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Waltham, MA, October 31, 2005 - Global Insight, the private company that brought together DRI and WEFA, the world's most respected economic analysis, forecasting and financial information companies, has announced the release of a major study commissioned by The Information Technology Association of America (ITAA), the leading trade association for the IT industry. This new study, "The Impact of Offshore Software and IT Services Outsourcing on the U.S. Economy and the IT Industry," finds that worldwide sourcing of computer software and services continues to increase the number of U.S. jobs, improve real wages for American workers, and has many other economic benefits as a result of pushing the U.S. economy to perform at higher levels.
Dr. Nariman Behravesh, Chief Global Economist at Global Insight, stated, "The benefits of free trade clearly provide a boost to the U.S. economy. Using offshore resources creates additional jobs, increases efficiency, reduces costs, dampens inflation, lowers interest rates, increases spending, and creates additional jobs." Behravesh concluded, "The challenge is to help displaced workers transition to other productive activities."
Major findings of the ITAA/Global Insight Study:
- Worldwide sourcing of IT services and software increases total employment in the United States. This activity generated an additional 257,042 net new U.S. jobs in 2005; by 2010, net new jobs will total 337,625;
- Workers enjoy higher real wages. Global sourcing adds to the take-home pay of the average U.S. worker. With inflation kept low and productivity high, worldwide sourcing will increase real hourly wages in the U.S. by $0.06 in 2005, climbing to $0.12 in 2010;
- The cost savings and use of offshore resources lower inflation, increase productivity, and lower interest rates. This boosts spending and increases economic activity;
- Worldwide sourcing contributes significantly to real U.S. Gross Domestic Product, adding $68.7 billion in 2005. By 2010, the real GDP will be $147.4 billion higher than it would be in an environment in which offshore IT software and services outsourcing does not occur;
- Spending for global sourcing of computer software and services will grow at a compound annual rate of 20 percent, from approximately $15.2 billion in 2005 to $38.2 billion in 2010. Total spending on software and services will also continue to increase in the U.S. During the same time period, total cost savings from worldwide sourcing of computer software and services will grow from $8.7 billion to $20.4 billion, much of which will be reinvested in the U.S.;
- Demand for U.S. exports increases due to global sourcing. Countries can buy more because they can sell more; the U.S. has more to sell through increased investment in new products and services, better productivity and lower inflation. Global sourcing contributed $5.1 billion to U.S. exports in 2005, growing to $9.7 billion by 2010;
- The U.S. continues to run a large and robust trade surplus in IT services with the rest of the world.
Harris N. Miller, ITAA President, stated, "Global sourcing continues to be a net positive for American workers and the U.S. economy. By driving down the costs associated with computer software and services and by opening more overseas markets to U.S. competition, global sourcing sharpens our country's competitive edge at home and abroad." Miller concluded, "The result is more American jobs, higher wages and a faster growing economy overall. As we first found when we conducted the original study in 2004, an informed approach to the global marketplace is the best antidote to protectionism and trade barriers."
The Study reveals several other important new insights: Between March 2001 and September 2003, IT job loss to offshore outsourcing-either domestic jobs eliminated or jobs created overseas instead of in the U.S.-totaled 111,828, or about 40,000 jobs per year. However, 313,172, or 73% of software and IT services jobs lost during this same period were caused by other factors, such as the overall slowdown in the U.S. and global economies and the bursting of the telecom and dotcom bubbles.
The 2005 Study found that raising barriers to worldwide sourcing would adversely impact U.S. workers and U.S. firms. If all global sourcing of software and IT services terminated completely, the impact would slow the U.S. economy and actually reduce the number of new jobs available to American workers.
While global sourcing increases jobs and wages, Miller said emphasis must continue to be placed on those U.S. IT workers negatively impacted by this economic shift. The 2005 Study offers a range of recommendations, including:
- Make information technology and other service sector workers eligible for government assistance when their jobs are displaced by foreign operations;
- Encourage students to achieve diverse skill sets and workers to keep their skill sets up-to-date. Current laws and legislation should be reviewed to assure that the U.S. educational system is being adequately supported at all levels;
- Preserve American leadership in innovation. Support basic research and development to help assure U.S. leadership and continued waves of innovation-driven economic growth.
The ITAA/Global Insight Study systematically assesses the impact of worldwide sourcing of computer software and services on the U.S. economy. Specific consideration is given to worldwide sourcing as it affects industrial productivity, employment, and trade. The results are broken down by industry and by state, so that elected officials can understand the positive benefits for their own constituents. The analysis is based on a thorough compilation of secondary and third-party data, and extensive econometric modeling to detail virtually every aspect of the U.S. economy.
For more information or to obtain a copy of the Executive Summary, go to the ITAA website or to the Global Insight Web site at: www.globalinsight.com/ITAA.
Contact:
Michael Raimondi, Global Insight, IT Advisory Svs
+(781) 301-9124, mike.raimondi@globalinsight.com
Bob Cohen, Information Technology Association of America, ITAA
+(703) 284-5301, bcohen@itaa.org
About ITAA
The Information Technology Association of America (ITAA) provides global public policy, business networking, and national leadership to promote the continued rapid growth of the IT industry. ITAA consists of over 350 corporate members throughout the U.S., and a global network of 67 countries' IT associations. The Association plays the leading role in issues of IT industry concern including information security, taxes and finance policy, digital intellectual property protection, telecommunications competition, workforce and education, immigration, online privacy and consumer protection, government IT procurement, human resources and e-commerce policy. ITAA members range from the smallest IT start-ups to industry leaders in the Internet, software, IT services, ASP, digital content, systems integration, telecommunications, and enterprise solution fields. For more information visit www.itaa.org.
About Global Insight
Global Insight, Inc. (http://www.globalinsight.com/) is a privately held company formed to bring together the two most respected economic analysis, forecasting and financial information companies in the world, DRI and WEFA. Global Insight provides the most comprehensive economic coverage of countries, regions and industries available, using a unique combination of expertise, models, data and software within a common analytical framework to support planning and decision-making. Global Insight collects and delivers economic and financial information to clients and also provides a broad range of consulting capabilities. With its April 2003 acquisition of World Markets Research Centre, Global Insight also provides the world's first same-day analysis and risk assessment service covering 196 countries and 4 industries, providing insightful analysis of market conditions and key events around the world. The company has over 3,800 clients in industry, finance and government with revenues in excess of $80 million, over 600 employees and 23 offices in 13 countries covering North and South America, Europe, Africa, the Middle East and Asia.
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