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Trump’s plan for protecting IT jobs raises hopes, fears

Patrick Thibodeau | Dec. 7, 2016
Incoming administration may be setting up a three-pronged attack on offshore outsourcing

States routinely offer tax incentives to high-tech firms to build data centers and new offices. Even outsourcing firms that use H-1B workers to help move jobs overseas have won state incentives.

In November 2014, North Carolina Gov. Pat McCrory, a Republican, announced an agreement to help Cognizant build an IT delivery and operations center in Charlotte. The company planned to create 500 jobs in the state by the end of 2018 and invest more than $1.4 million.

Cognizant received a grant tied to job creation requirements. The state said that over 12 years, the award "could yield aggregate benefits to Cognizant of more than $5 million." McCrory lost re-election this November in a state Trump won.

Firms that want to outsource IT offshore also hire Cognizant, including EmblemHealth in New York. About 200 Emblem IT employees were told earlier this year that they were losing their jobs. At MassMutual Financial Group about 100 IT employees faced layoffs after the firm hired Cognizant.

But incentives, as in the case of Carrier, are usually awarded on a case-by-case basis. The Trump administration effort appears focused on broader initiatives, namely tariff changes and visa reform, to raise the cost of offshore outsourcing.

The tariff proposal -- if it's applied to services as well as physical goods -- will raise the cost of IT outsourcing. But analysts say Trump hasn't provided the necessary specifics to understand the impact on IT costs if that were to occur.

Trump's "comments are too high-level to know how or if they will affect the services markets," said Peter Bendor-Samuel, founder and CEO of the Everest Group, a research firm and consultancy. But it is possible to imagine Trump "working with a newly protectionist" Congress that changes tax laws to penalize offshoring of services, he said.

In terms of IT services, David Wagner, vice president of research at Computer Economics, says a tariff's impact on services won't be drastic on overall IT budgets. The company's research shows that U.S. firms are spending only about 10.6% of IT budgets on outsourcing at the median, and an even smaller amount would be affected by tariffs, he said.

Trump has also proposed increasing prevailing wages for H-1B workers, as well as restricting the use of visa workers. In theory, it's argued, this will make it more difficult and expensive to move work offshore.

Pena, the former Abbott IT professional, believes the only thing that will have a significant impact on offshore outsourcing is reform of the H-1B visa.

"What I do know is that this is a war on the value of IT professionals in America and our elected public officials are complicit in it," said Pena, who left his job without taking a severance because he didn't want to be bound by a non-disparagement clause. He told his story in a video . "What I also know is that I am a casualty of this war and I am suffering tremendously from its devastation," he said.


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