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IT Outsourcing and the U.S. Economy

A new study by Global Insight concluded that IT outsourcing, while displacing some IT workers, actually benefits the U.S. economy and increases the number of U.S. jobs.

According to the 2005 study, The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry, the U.S. economy has much to gain from global sourcing and an environment of free trade, open markets and robust competition. Benefits include job creation, higher real wages, higher real GDP growth, contained inflation and expanded exports resulting in increased economic activity.

The Study was commissioned by The Information Technology Association of America (ITAA), the leading trade association for the IT industry, and led by Global Insight's chief economist Dr. Nariman Behravesh.

Major Findings include:
  • 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;
Study Details:

For more information, please contact:

Mike Raimondi
Global Insight IT/Telecom Advisory Service

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