U.S. Businesses Need India's Talent And Costs To Compete--With IndiaU.S. Businesses Need India's Talent And Costs To Compete--With India

The nearly inevitable rise of India as a major manufacturer of commercial software throws a new wrinkle into the debate over offshore outsourcing and what, if anything, should be done to protect the jobs of U.S. IT workers threatened by the phenomenon.As my story in this week's information shows, India's sales of natively developed software and intellectual property are increasing at annual clip of 30%.

Indian vendors like Final Quadrant and Talisma are aggressively targeting the U.S. market with unique, innovative products. And their low costs give them a big edge in the market. Talisma, for instance, recently prevailed over Siebel and Salesforce to win a contract at Sharebuilder.com.

To match costs with Indian software makers, U.S.-based vendors like IBM, Oracle, and Microsoft are shifting much of their development work to India, a practice that has drawn the ire of opponents of offshoring. However, if limits are placed on the ability of American software makers to offshore development, they will eventually be unable to compete with indigenous Indian firms. That will mean fewer customer wins, a dwindling global market share, and, eventually, the loss of the very programming jobs that offshoring's critics are trying to protect.

Some might argue that Congress should slap big tariffs on software imported from low-cost countries like India to give American IT workers a fair shot. But that would be foolhardy in the long run. In addition to denying American business access to new, innovative technology, it would do little to help U.S. software companies compete globally. In fact, history shows that industries protected by tariffs tend to become uncompetitive and ultimately wither.

No, the only way American software companies can continue to retain their status as the world's best is to use the best talent, from all over the world, while continuing to innovate and help customers solve business problems. India's IT industry is a 3,000-pound elephant that the United States needs to harness, because it is getting much too big to just push out of the way.