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Press Release: Opinion Editorial by Tom Salonek, Intertech CEO, appears in Star Tribune

Printed in the Star Tribune, March 22, 2004 Don't ban outsourcing; create jobs Tom Salonek March 22, 2004 It must be an election year. How else to account for all the recently introduced legislation, in Minnesota and elsewhere, designed to keep U.S. jobs from being outsourced to companies overseas that can do the work for considerably less than their American counterparts? With more than 3.3 million U.S. jobs projected to leave the country during the next decade, this is an issue affecting many worried voters. The temptation to offer seemingly simple legislative solutions must be overwhelming to politicians -- particularly those trying to hold onto their own jobs. There's only one problem with legislative solutions: They won't work. As the owner of two technology-related companies in Minnesota, I can tell you first-hand that the pressure to outsource work overseas is strong and growing. I wish it weren't the case. As a card-carrying American, I'd just as soon hire people in the United States to meet all of my clients' needs. And, frankly, it's simpler to manage employees in the next cubicle or down the hall. It's more efficient to gather everyone into the same conference room for a quick daily meeting to check the status of projects. And it's infinitely easier to communicate with someone who speaks English and lives in the same time zone. But as my father used to remind me, no honest man ever said that life -- or business -- is easy. The much-ballyhooed global village is alive and well today. From your electronic equipment to the food you eat and the car you drive, many people from other countries have had a large hand in getting those goods to your home cheaply and in record time. As much as Americans bemoan the jobs lost to outsourcing, most love shopping for bargains at Wal-Mart. It's no wonder that Fortune magazine just named Wal-Mart the "most admired company in America." It has created five of the 10 richest people in the world. On the business side of the equation, it's no different. Stockholders want companies to keep earning higher profits every single quarter. That's tough to do without finding ways to cut costs. Outsourcing offers a way to significantly lower business costs, from writing software code to answering call center phones. Something's got to give to keep our economic system humming. I'm well aware that the legislation being suggested by Gov. Pawlenty and others around the country is aimed at protecting jobs being outsourced by government agencies. No self-respecting politician wants to say that government contracts help employ non-Americans overseas on his or her watch. But, as a nation that worships cost-cutting Wal-Mart, do we really buy into these initiatives? Competitive advantage Unlike many, I don't believe that outsourcing is the scourge on the economic landscape that politicians are making it out to be in this election year. As a business owner, I'm committed to finding out what works for customers and doing right by my employees. My company has experimented with outsourcing certain software projects. Our goal was to find a way to work with people who shared our work ethic, client philosophy and commitment to doing great work on time and within budget. We wanted to combine our employees in Eagan with workers in another country by linking them over the Internet into one lean, software-development machine capable of developing software 24 hours a day, five days a week, thanks to differences in the time zones. It didn't quite work out that way. Cultural differences and communications challenges made it tough to manage the team and keep things moving smoothly. We've decided to put that initiative on hold, for now, while we work out the bugs. Competitive pressures leave us no choice but to try again. As Robin Vasan, managing director of Mayfield Fund, a venture-capital firm based in Menlo Park, Calif., notes in a recent issue of Time magazine: "Any start-up today, particularly a software company, that does not have an outsourcing strategy is at a competitive disadvantage." It's the same story for small companies and big companies, too. The larger companies, such as Dell, are blazing the trail to find ways to make outsourcing work. They have developed different levels of support, based on the size of their customers. Higher-end customers -- those that spend in the thousands, not the hundreds -- automatically receive access to customer support centers based in the United States. Those customers pay more and must keep their operations running smoothly. Conversely, smaller customers enjoy lower costs on computers but must make do with offshore customer support. Instead of turning outsourcing into a lose-lose political football, our leaders should get out of the way and let the market sort out the pros and cons. Instead of pointing fingers at the North American Free Trade Agreement (NAFTA), which the Labor Department estimates was responsible for the loss of more than 500,000 U.S. jobs between 1994 and 2002, we should be looking for ways to expand new businesses and encourage innovation at home. For good or ill, we live in a global village. Pretending otherwise is an exercise in futility. Forcing businesses, or government agencies for that matter, to ignore competitive pressures and pay higher costs of doing business will only further hobble our economy.

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