December 17th, 2009
02:00 PM ET

Is offshoring a national security risk?

Editor's Note: This article continues our series excerpted from AC360°'s contributor David Gewirtz's upcoming book, How To Save Jobs, which will be available in December. Over the next few months, we'll be excerpting the first section of the book, which answers the question, "How did we get here?" Last time, we looked at outsourcing the American dream. This time, we look at something rarely discussed: the national security risks offshoring creates. To learn more about the book, follow David on Twitter @DavidGewirtz.

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David Gewirtz | BIO
AC360° Contributor
Editor-in-Chief, ZATZ Publishing

What's particularly disturbing in a post-9/11 America supposedly more aware of national security issues is just how much confidential American data is finding its way into the hands of foreign nationals.

According to the same U.S. Trade Commission report described last week, "Some of the earliest U.S. services outsourced to India included medical transcription services, payroll accounting, credit card call collections, mortgage and insurance claim processing, and data processing."

That means individuals and companies in foreign countries have access to our credit card records and much of our personal identity information, our confidential medical records, and even detailed information about our homes. According to a study by McKinsey Global, nearly 45 percent of the Indian business process outsourcing market consists of financial work, administration work, and payment processing activities.

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In a world where identity theft is a huge problem, giving foreign nationals access to our most confidential private information is a dangerous security risk. Consider this: the countries most likely to engage in cyber-espionage with the United States are also the countries with lower-wage employees - places where we're actively sending our most confidential data.

We're also outsourcing our intellectual property and our most valuable trade secret data

Our top technology companies - IBM, Microsoft, and Oracle - are also among the most active in both bringing in foreign technology workers and in outsourcing technology work to foreign nations.

Consider that a typical American computer programmer can demand a salary from $60,000 to $90,000 (and often a lot more). In India, an equivalent job pays from $6,000 to $10,000 per year. Forrester estimates 472,632 software development jobs will be outsourced to India by 2015.

The impact of this is not just lost jobs. You're looking at nearly half a million people outside the United States who will have access to the source code that runs our computers, our systems, and our lives. Instead of Americans having access to the confidential crown jewels of modern technology, it'll be technology experts with loyalty to another nation.

There's also a huge cadre of foreigners in the United States with access to top-secret and sensitive information. Our technology universities often hire professors and graduate students who are foreign nationals. Those same universities often do research projects for both the American military and America's leading industrial firms. Who, exactly, do you think is doing the work? It's not just Americans.

In fact, there are thousands of foreign nationals working on sensitive projects in the United States. But where does their loyalty lie? To the U.S., or to their home country, where their families are often waiting for them to return?

Beyond security concerns, this drain of tech work to foreigners directly impacts American competitiveness. We have long relied on our ability to out-engineer other nations. But if the design and innovation jobs are outsourced, there will be far less reason for students in America to learn these skills and far less Americans providing the creative juice that has long fueled American economic growth.

Make no mistake: each and every one of us is competing with people across the world for our jobs and our income. You may not be a programmer trying to explain why you should be paid $120,000 (or even $60,000) when an equally competent Indian is willing to work for $6,000, but nearly everyone in America will feel the impact as spending power moves offshore.

After all, if a U.S. programmer is out of work, he's not going to buy all the stuff middle-class Americans buy. And, given that his Indian counterpart makes 10 percent of what the American would make, the overseas software developer is also not going to be able to make all the discretionary purchases that the American would have made. Each U.S. job shifted overseas has a ripple effect on America's overall economy.

And there's a lot of people available to do those jobs. Billions, in fact...

Follow David on Twitter at http://www.Twitter.com/DavidGewirtz.

Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.

Filed under: David Gewirtz • Economy • Unemployment
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