Squeeze Play - Page 2 of 5

Squeeze Play

the next 12 years, accounting for as much as $136 billion in wages. Compared to the 540,000 positions that have been exported so far, the number of exported jobs will grow to 30% to 40% a year.

Economic factors and the growth of technology have contributed to the offshoring explosion in the U.S. First, offshoring can dramatically cut labor costs for U.S. companies. With the low cost of living in developing countries, management only has to pay workers there a mere fraction of the wages that white- and blue-collar American workers earn domestically. The pay gap is particularly wide for white-collar positions: A computer programmer stateside earns an average of $63,000 a year. In India, the same worker earns less than $6,000 a year.

A U.S. financial analyst makes approximately $7,000 a month, while his or her counterpart in India makes just one-seventh that amount.

The worldwide spread of fast and reliable Internet and telecom connections means U.S. companies can easily cash in on bargain wage rates overseas. Communications and the transfer of data overseas is now remarkably simple, says Paul Almeida, head of AFL-CIO’s Department for Professional Employees. “If your work can be digitized, scanned, or turned into binary code, chances are it is already getting shipped abroad,” says Almeida.

Despite the discouraging outlook, many black-owned businesses are proving that offshoring does not spell the end of contracting as we know it. Instead, many small to midsize companies are developing innovative strategies such as allying with corporate customers to conquer the outsourcing beast. Staffing Solutions, a Boston personnel service with $7 million in revenues for 2004, partnered with the technical staffing company TAC Worldwide, keeping computer contracts and jobs stateside. Staffing Solutions CEO Earl Tate, head of the company for 21 years, has countered the trade winds so successfully that IT business has grown nearly 40% in the past year.

Before forging the alliance with TAC Worldwide, Tate was at a crossroads when the high-tech and Internet bubble began leaking. Sales in 2001 dropped off 50%, and Tate knew clients were replacing his staffers with cheaper offshore labor. He began investigating Federal set-aside programs to drum up business, but he soon realized his company needed to expand its reach to qualify. So Tate decided to bring in a partner with revenues over $600 million. Staffing Solutions hammered together a joint venture with a majority stake, lifting its business and offering new opportunities to its partner as well. Tate says the alliance has helped boost revenues from $3 million a year to as much as $8 million expected in 2005. By joining forces with TAC, “we’ve essentially outsourced our ability to fill a job offer,” says Tate. The partnership has also helped Tate snare work from Fortune 500 clients, including DaimlerChrysler.

While offshoring is beginning to ravage information technology firms and other white-collar outposts, one niche that has long been a stable source of income for BE 100s firms is still safe: government contracting. The reasons