Service providers say the rule will have little impact, because offshore outsourcing is unusual at the federal level. They’re more concerned about laws that would restrict offshore outsourcing at the state level.

A law that prohibits offshore outsourcing by federal agencies will have little practical impact, according to vendors that sell IT services to the government. But its passage indicates that the practice of shifting high-tech work to low-wage countries is stirring an increasingly shrill chorus of protectionist voices in Washington and alarming foreign governments whose prosperity depends on the outsourcing wave.
Even prior to the enactment of the law on Friday, federal CIOs had been reluctant to place work offshore. Their main reasons for not doing so included the growing political backlash against the practice and concerns over privacy and security, according to numerous IT-services sales representatives.

A spokesman for IBM says the company’s federal government contracts typically don’t involve offshore work. An Accenture spokesman says his company also doesn’t perform federal IT work overseas “because none of the agencies have asked for it.” Sam Sliman, executive VP at Irving, Texas-based IT services contractor Optimal Solutions Integration, says his company’s Bangalore, India, office doesn’t perform work for the U.S. government.

Sliman, however, says he’s concerned that the legislation may strain trade ties between the United States and India and make it more difficult for his company to sell services to the Indian government. “That may be the real impact of this,” Sliman says. In an interview this week with the Press Trust of India news agency, Indian IT minister Arun Shourie said his government views the U.S. anti-offshore outsourcing legislation as protectionist. “I feel this would worsen prospects of multilateral negotiations in trade,” Shourie told the news agency.

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