In a recent Wall Street Journal Business Technology article, findings of the Black Book of Outsourcing were discussed. In this year's survey, the Black Book discovered a trend of moving work back to on-shore and near-shore service centers - particularly for tasks where communication is important.

This is interesting for several reasons. First, it means that offshore-based companies are finally learning that something beside pure price is important - and that the ability to communicate with your customer is a critical factor in outsourcing success. Second, it means that cash-rich Indian companies may finally start buying into the US market as opposed to remaining happy servicing clients from afar. Finally, it acts as a call for the Indian offshore companies to really start focusing on customer service.

This approach may also save the Indian outsourcing industry from the political ire of US officials. By providing jobs in the US, Indian firms could counter-balance the perception that they are harming the US economy. This could be their best defense.

A recent ComputerWorld Article, discussed the disproportionate effect of outsourcing on IT workers, citing a recent study by Stern and Wharton business schools which found that as many as 8% of all tech workers were displaced by offshore outsourcing.

The study, funded by Careeerbuilder.com, also looked at other occupations and found, most disturbingly, that older workers were the ones most likely to be affected by this practice. This is a disturbing trend for a number of reasons, and as it becomes better known, it may create a major disincentive for students to enter this industry.

Furthermore, companies that outsource with an underlying motivation of displacing their older workers could find themselves in an age discrimination suit - one that would be supported by a significant amount of anecdotal evidence.

The answer to this is to focus on capability sourcing, not cost sourcing - but in this current frenetic environment, it is unlikely that such a focus will take hold anytime soon.

Underlying the angst over outsourcing shown by both the center-left and far-right factions of the US political spectrum is something greater that the concept of "sending jobs offshore." It is a deep-seated feeling that the "ownership society" - corporate management and shareholder groups - have used outsourcing and offshoring to further extract rents from the other stakeholder groups - generally represented by the center-left and far-right.

These groups make interesting bedfellows, no doubt. The center-left consists of union members, working class people, highly-educated intellectuals and communitarians, and military "doves." The far-right encompass social conservatives, military "hawks," fundamentalists (of all religious stripes) anti-immigration activists. Both of these groups see threats in outsourcing and H1B policies.

The center-right, on the other hand, can be characterized as an "ownership society" - where the creation of private wealth and shareholder value takes primacy - and freedom of action for large ownership entities is seen as a valuable goal.

This becomes a shareholder vs. stakeholder argument. Certainly, the shareholder argument is compelling to many. Success is measurable (the share value goes up) - and therefore easy to compare. However, stakeholder-rights groups look to more factors, like job creation, income distribution, community stability, etc. These factors are, however, difficult to quantify. In a world that is seemingly more and more run by accountants, relying upon non-quantifiable benefits can prove to be a challenge.

What does this all mean to the outsourcing community? In the short term, probably caution and concern. Harm to stakeholders is a compelling election-time argument. The bigger danger, however, may be in the long term - with either a McCain-Palin or Obama-Biden administration.

McCain's appeal is a populist appeal - and his understanding of the economy is generally viewed as weak. A populist with little understanding of the economy is bound to lash out against a policy that looks bad to most folks. Add to that Palin's far-right background, and an "America First" campaign, and the future doesn't look bright for outsourcing under a McCain administration.

Obama also presents challenges to the outsourcing community. He has already said that he'll adjust tax policy to remove incentives for outsourcing. His support from minority communities and labor unions will, no doubt, further move him in that direction.

In either case, the outsourcing, and particularly offshoring, may be further lionized and constrained and long term - much like Japanese cars were lionized in Detroit in the early 1980's. Japan's answer - which proved for many reasons to be a wise and successful one - was to build cars in the U.S. In fact, many Toyotas and Hondas are built right here, while Chevrolets and Ford are designed and built abroad. In many ways, Toyota is more American than GM right now.

Outsourcers need to do more than sloganeer - the statements about how outsourcing "benefits" the US economy simply don't ring true over here. Taking a page from the Toyotas and Hondas of the world, they need to invest in the US economy by establishing meaningful presences and providing jobs here, too. Then, services could be distributed across the world in a best value rather than lowest cost manner - and much of the criticism could be deflected. Until then, expect a rocky road.

Articles of interest include a couple from the India Daily here and here, The Economic Times and ZeeNews, among others.

John McCain's selection of Sarah Palin as Vice Presidential nominee has certainly created a lot of buzz in the US press. It is also beginning to be digested by the international press.

One of the more interesting articles that I read came from the India Daily. In this article, the author asserts that the Indian outsourcing sector could be badly hurt if Palin becomes President (and, I would also assume, if she has a substantive policy role).

This assertion comes from an analysis of Palin's support of Pat Buchanan in prior elections. Mr. Buchanan, an ultra-conservative US candidate in 2000. Mr. Buchanan was staunchly against outsourcing and H1B visas, two policies that have helped India prosper.

This is telling of what looks like it will become a strange and unique election cycle. The question really is whether either candidate will take a position with regard to outsourcing at all, or whether the pro and con talk is merely political positioning.

The Indian blogosphere has been up in arms since Barack Obama's speech last night - particularly the part that said that he would eliminate tax breaks for companies that offshore, while granting tax breaks to those who keep jobs in the U.S.

Some have been quoted saying that "this would do more harm to America than good." Others fear that this will begin a pull-back away from Indian service companies. But, at the end of the day, all it will really do is raise the cost of doing business in India and lower the cost of doing business domestically.

Without regard to whether I think it is good or poor policy, many governments have, over time, created incentives to create jobs within their borders. Sometimes this comes from tax breaks and other public subsidies, other times the underlying means is less transparent. However, India (and every other government) has, on a regular basis, established incentives to promote job growth within their borders.

Viewed through this lens, the policy seems far more reasonable - using tax policy to incentivize desired behavior. Certainly, India could create additional incentives to offset some of these costs, rebalancing the equation.

What ever the spin and whatever your perspective, the position offered by Mr. Obama will not eliminate offshoring, but instead may alter the equation a bit. I seriously doubt that it will reach the tipping point, however.

Legal Process Outsourcing firms are buzzing about a recent ABA Opinion that discusses Legal Process Outsourcing. The hype would tell you that the ABA gave Legal Process Outsourcing a big "thumbs up," but a closer read of the opinion raises some very important issues (and potential concerns). Certainly, the article reads more like an acceptance of fact than a ringing endorsement - as some of the LPO bloggers would, no doubt, prefer.

As an initial point, it is important to remember that the ABA, while an important organization, has no real rule-making ability. That ability, instead, falls to the state bar associations.

Looking at the article, it is important to note that simply handing off the work to a foreign lawyer - and forgetting it - is not acceptable. Furthermore, the opinion suggests an active management role, including site visits, vetting individual attorneys and other management activities that have proven difficult for companies with a large outsourcing presence, and will likely be near-impossible for law firms, with somewhat arcane management practices, to fulfill.

Fees were another interesting area of the report. The door was open to marking up fees, but such a markup had to be "reasonable for the services rendered." Also, if charged as a disbursement, the fees should be passed through at cost, with a modest administrative charge. This approach is somewhat inconsistent with the approach taken by some local bar associations, who suggest that the charges are a disbursement and must be passed through without markup.

In the end, this Opinion letter will no doubt erase some concerns about Legal Process Outsourcing. However, many questions still remain - including acceptance by the client community, acceptance by more traditional law firms, and a clear understanding of the operation of the rules surrounding the practice of law.