Detroit. The Next Offshore Location?

Here’s more evidence that it may make sense, or perhaps should be required, to keep IT jobs here in the U.S. Fortune reported that New Jersey-based software company GalaxE Solutions set up shop in Detroit a few months ago and plans to hire up to 500 people over five years. The article quipped: "Only the landing of a flying saucer might have been more unexpected."

GalaxE’s CEO explained that in the past he has happily offshored some operations to India, but he finds that some of his clients specify that their software must be written and maintained in the U.S. "I looked in Newark, I looked in Camden, N.J., I looked in Trenton, in Cleveland, in West Virginia," he told Fortune. "I chose Detroit, and I really love the place." One big advantage: an abundance of IT workers stuck in houses are that are underwater in the real estate market. At the same time, the state of Michigan is delivering more than $5 million in tax incentives.

The requirement that contracted IT work must be completed on domestic shores is sure to gain traction in coming years, especially with government-related work. So it seems inevitable that second-tier cities, especially those in the Midwest, are going to be scrutinized by growing businesses looking to uncover relatively inexpensive IT talent and inexpensive office space.

— Don Willmott

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20 Responses to “Detroit. The Next Offshore Location?”

October 07, 2010 at 4:14 am, techbusiness said:

The problem started in the 60’s, with manufacturing jobs leaving the country, the US trade negotiators pushing for free trade in goods and services, large businesses (both public and priavate) leveraging lower cost off-shore labor costs to achieve higher returns … This all seemed to sort of work for a while. The costs were borne by working class americans, but the middle class (voters) just saw better returns on their investments and reduced inflation (reduced compared to what would have happened, where inflation was/is driven by increasing deficits, for expenses such as the viet nam war, reagan-era deficits, etc.). The complaints and anger we are seeing now reflect a disconnect between reality and expectation. The stock market bubble, followed by the housing bubble, with rising personal debt, reflect attempts by middle class americans to deal with the fact that these situation faced by the working class has climbed the compensation ladder, to affect middle class jobs. There is reduced ‘real’ compensation for US-based labor — H1B’s are not the cause, merely part of the result. If we put back a reasonable tariff structure, and replaced the payroll and income taxes with wealth (asset) taxes, we would change the business equations for hiring in the US, fund necessary gov’t functions in a less regressive manner, and even provide a way for US labor to live in dignity on minimum wages because there would be less withholding on their wages. Remember, 1% of us own more than 97% of us combined. [Like the old saw, ‘don’t tax you, don’t tax me, tax that other fellow behind the tree’.]

Reply

October 07, 2010 at 4:14 am, techbusiness said:

The problem started in the 60’s, with manufacturing jobs leaving the country, the US trade negotiators pushing for free trade in goods and services, large businesses (both public and priavate) leveraging lower cost off-shore labor costs to achieve higher returns … This all seemed to sort of work for a while. The costs were borne by working class americans, but the middle class (voters) just saw better returns on their investments and reduced inflation (reduced compared to what would have happened, where inflation was/is driven by increasing deficits, for expenses such as the viet nam war, reagan-era deficits, etc.). The complaints and anger we are seeing now reflect a disconnect between reality and expectation. The stock market bubble, followed by the housing bubble, with rising personal debt, reflect attempts by middle class americans to deal with the fact that these situation faced by the working class has climbed the compensation ladder, to affect middle class jobs. There is reduced ‘real’ compensation for US-based labor — H1B’s are not the cause, merely part of the result. If we put back a reasonable tariff structure, and replaced the payroll and income taxes with wealth (asset) taxes, we would change the business equations for hiring in the US, fund necessary gov’t functions in a less regressive manner, and even provide a way for US labor to live in dignity on minimum wages because there would be less withholding on their wages. Remember, 1% of us own more than 97% of us combined. [Like the old saw, ‘don’t tax you, don’t tax me, tax that other fellow behind the tree’.]

Reply

October 07, 2010 at 6:35 am, Jon said:

So they will fill the Detroit jobs with H1Bs…. its not about creating jobs rather creating jobs for American US citizens who pay US taxes and spend their money on US soil instead of shipping their paychecks overseas.
The number one request on the republican “Speak out America” is stop giving TAX breaks to outsource jobs… How about tax incentives to hire US citizens and bring outsourced jobs back to this country… Gee why doesn’t anyone get this… the unemployment rate is directly proportional to the sum of ( outsourced jobs, H1Bs working in this country, and green cards working in this country who have no interest in citizenship ). Nobody seems to get this, we can basically put every US citizen back to work within 3 – 6 months who wants a good job and wants to work!

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October 07, 2010 at 6:35 am, Jon said:

So they will fill the Detroit jobs with H1Bs…. its not about creating jobs rather creating jobs for American US citizens who pay US taxes and spend their money on US soil instead of shipping their paychecks overseas.
The number one request on the republican “Speak out America” is stop giving TAX breaks to outsource jobs… How about tax incentives to hire US citizens and bring outsourced jobs back to this country… Gee why doesn’t anyone get this… the unemployment rate is directly proportional to the sum of ( outsourced jobs, H1Bs working in this country, and green cards working in this country who have no interest in citizenship ). Nobody seems to get this, we can basically put every US citizen back to work within 3 – 6 months who wants a good job and wants to work!

Reply

October 07, 2010 at 7:56 am, Jerry said:

I’m from the Greater Detroit area and I agree with Jon. Over the past decade, the tech community in Southeastern Michigan has been inundated with H1Bs and I’ve known a few who never filed for a status change after they went off contract. They know nobody’s checking-up on them.

I also agree with Jon that nobody seems to understand this.

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October 07, 2010 at 7:56 am, Jerry said:

I’m from the Greater Detroit area and I agree with Jon. Over the past decade, the tech community in Southeastern Michigan has been inundated with H1Bs and I’ve known a few who never filed for a status change after they went off contract. They know nobody’s checking-up on them.

I also agree with Jon that nobody seems to understand this.

Reply

October 07, 2010 at 9:32 am, S said:

h1b’s and greencard holders do pay taxes they also get to file for Social security after working here 7 years (I think it was according to what one of my h1b coworkers told me), that is why they return to their countries after and receive retirement money that their own governments don’t provide… and this money goes into their economies and out of ours at that point. I just don’t know what our politicians are thinking… Regardless, we also need to buy American or made in USA (more companies are listing this clearly on their products) and for us in Michigan we have BetterMade chips, Faygo, kelloggs, cars, morley chocolates, etc.

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October 07, 2010 at 9:32 am, S said:

h1b’s and greencard holders do pay taxes they also get to file for Social security after working here 7 years (I think it was according to what one of my h1b coworkers told me), that is why they return to their countries after and receive retirement money that their own governments don’t provide… and this money goes into their economies and out of ours at that point. I just don’t know what our politicians are thinking… Regardless, we also need to buy American or made in USA (more companies are listing this clearly on their products) and for us in Michigan we have BetterMade chips, Faygo, kelloggs, cars, morley chocolates, etc.

Reply

October 07, 2010 at 9:51 am, Angela said:

Jon/Jerry – although I agree with you this issue is deeper than the green card holders and H1Bs. Both these groups legally live in the US, work in the US, pay taxes in the US, and pump the US economy with their day to day spending ¿ by no means do they fit the ¿outsourcing¿ dilemma impacting this country. The term ¿outsourcing¿ did not enter the English-speaking lexicon until the 1980s. Since the early 80¿s US companies (thousands) moved towards outsource everyday jobs. In the early 90¿s US sent the Textile and Apparel industry flying out of this country causing millions of dollars in unemployment in New York, New Jersey, Pennsylvania and California to name a few. It was the end of an era which we as ¿Voters¿ (Citizens) ignored. Politicians condemn it publicly and support it in close doors and businessmen defend it, but rarely does anyone step back and take a dispassionate look at it. Here are some of the reasons; lower wages, lower regulatory cost, overseas tax benefits, lower labor laws, less lawsuits, etc. ¿A 2008 survey found 25% of CFO¿s polled listed ¿uncertain about political and business climate¿ as a reason for outsource. The article reads: ¿Justified or not, fears about higher taxes, more regulation, unstable currency and political interference in business activity are demonstrably affecting how companies make their hiring decisions.¿ Until ¿Voters¿ (Citizens) understand this ongoing growth of ¿outsourcing¿ is the foundation to the troubled economy in our country our Politicians and Businessmen will continue to drive jobs out of this country. Outsourcing is not a problem of immigrants, green card holders or H1BS ¿ legal or not if they live in this country they spend dollars in this country, they buy, rent and/or consume in this country ¿..a $10.00 job in the USA is moved to India for approximately $1.10 ¿ not only did a person in America is unemployed ¿ the $1.10 is spent in India ¿ it is NEVER pumped back into our economy. Write to your Politician and demand immediate action.
Google: Exporting America for find a list of companies pushing our jobs out

Reply

October 07, 2010 at 9:51 am, Angela said:

Jon/Jerry – although I agree with you this issue is deeper than the green card holders and H1Bs. Both these groups legally live in the US, work in the US, pay taxes in the US, and pump the US economy with their day to day spending ¿ by no means do they fit the ¿outsourcing¿ dilemma impacting this country. The term ¿outsourcing¿ did not enter the English-speaking lexicon until the 1980s. Since the early 80¿s US companies (thousands) moved towards outsource everyday jobs. In the early 90¿s US sent the Textile and Apparel industry flying out of this country causing millions of dollars in unemployment in New York, New Jersey, Pennsylvania and California to name a few. It was the end of an era which we as ¿Voters¿ (Citizens) ignored. Politicians condemn it publicly and support it in close doors and businessmen defend it, but rarely does anyone step back and take a dispassionate look at it. Here are some of the reasons; lower wages, lower regulatory cost, overseas tax benefits, lower labor laws, less lawsuits, etc. ¿A 2008 survey found 25% of CFO¿s polled listed ¿uncertain about political and business climate¿ as a reason for outsource. The article reads: ¿Justified or not, fears about higher taxes, more regulation, unstable currency and political interference in business activity are demonstrably affecting how companies make their hiring decisions.¿ Until ¿Voters¿ (Citizens) understand this ongoing growth of ¿outsourcing¿ is the foundation to the troubled economy in our country our Politicians and Businessmen will continue to drive jobs out of this country. Outsourcing is not a problem of immigrants, green card holders or H1BS ¿ legal or not if they live in this country they spend dollars in this country, they buy, rent and/or consume in this country ¿..a $10.00 job in the USA is moved to India for approximately $1.10 ¿ not only did a person in America is unemployed ¿ the $1.10 is spent in India ¿ it is NEVER pumped back into our economy. Write to your Politician and demand immediate action.
Google: Exporting America for find a list of companies pushing our jobs out

Reply

October 07, 2010 at 10:01 am, Michael said:

I am in the IT professional services industry and I live in the Metro Detroit area. This area is not saturated with H1B employees for tech positions. In fact the opposite has occurred. We are facing two challenges in this area. The first is that a lot of the tech jobs were cut drastically during the recession (H1B employees where some of the first to get let go). To date we have a lot of great tech talent (including college grads) leaving the state of michigan or have already departed for obvious reasons-poor housing market, lack of tech jobs, and long term instability of the michigan economy due to the concentration of the tax base from the auto industry. Secondly, the true small business tech companies in SE Mich have left the state or opened operations in other states due to the high business taxes that Michigan has. Our SE Michigan government needs to take a lesson from the Ann Arbor area on how to attract, retain, and cultivate a tech hub. Jon-H1b’s pay the same payroll taxes that Citizens pay and they spend money just like you and I to drive our economy.

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October 07, 2010 at 10:01 am, Michael said:

I am in the IT professional services industry and I live in the Metro Detroit area. This area is not saturated with H1B employees for tech positions. In fact the opposite has occurred. We are facing two challenges in this area. The first is that a lot of the tech jobs were cut drastically during the recession (H1B employees where some of the first to get let go). To date we have a lot of great tech talent (including college grads) leaving the state of michigan or have already departed for obvious reasons-poor housing market, lack of tech jobs, and long term instability of the michigan economy due to the concentration of the tax base from the auto industry. Secondly, the true small business tech companies in SE Mich have left the state or opened operations in other states due to the high business taxes that Michigan has. Our SE Michigan government needs to take a lesson from the Ann Arbor area on how to attract, retain, and cultivate a tech hub. Jon-H1b’s pay the same payroll taxes that Citizens pay and they spend money just like you and I to drive our economy.

Reply

October 07, 2010 at 10:19 am, Angela said:

Outsourcing has little to do with Green Card holders and H1Bs – these groups legally live in the US, work in the US, pay taxes in the US, and pump their dollars earned back to the US economy – by no means do they fit the outsourcing crisis impacting the USA. ¿Outsourcing¿ was ignored in the late 80s to early 90s as there was a mass movement to place jobs in other countries – we ¿Voters¿ (Citizens) ignored it. The growth of ¿outsourcing¿ is the core of unemployment and the troubled economy in our country. Jobs will continue to be driven out of this country unless US citizens take action but please don¿t be fooled ¿ Outsourcing Jobs – has nothing to do with immigrants, green card holders or H1BS in the US¿ these folks legal or not live here and pump their local economy with US Dollars. A job outsourced from USA not only is it one less person working in the USA but less US Dollars spent in our communities. We need to demand change. See ¿Exporting America ¿ CNN¿

Reply

October 07, 2010 at 10:19 am, Angela said:

Outsourcing has little to do with Green Card holders and H1Bs – these groups legally live in the US, work in the US, pay taxes in the US, and pump their dollars earned back to the US economy – by no means do they fit the outsourcing crisis impacting the USA. ¿Outsourcing¿ was ignored in the late 80s to early 90s as there was a mass movement to place jobs in other countries – we ¿Voters¿ (Citizens) ignored it. The growth of ¿outsourcing¿ is the core of unemployment and the troubled economy in our country. Jobs will continue to be driven out of this country unless US citizens take action but please don¿t be fooled ¿ Outsourcing Jobs – has nothing to do with immigrants, green card holders or H1BS in the US¿ these folks legal or not live here and pump their local economy with US Dollars. A job outsourced from USA not only is it one less person working in the USA but less US Dollars spent in our communities. We need to demand change. See ¿Exporting America ¿ CNN¿

Reply

October 07, 2010 at 10:35 am, Dman said:

Corporate GREED!

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October 07, 2010 at 10:35 am, Dman said:

Corporate GREED!

Reply

October 07, 2010 at 11:35 am, Syed Khawar said:

I am 100% convinced with Angela and Micheal but you can’t do anything it’s a business they want to double and triple their investment ASAP.

Reply

October 07, 2010 at 11:35 am, Syed Khawar said:

I am 100% convinced with Angela and Micheal but you can’t do anything it’s a business they want to double and triple their investment ASAP.

Reply

October 08, 2010 at 11:32 am, Robert said:

Jon commented “The number one request on the republican “Speak out America” is stop giving TAX breaks to outsource jobs… How about tax incentives to hire US citizens and bring outsourced jobs back to this country”

How about this: Republicans (many of whom are backed by and are lobbyists for the super rich and big corporations) should simply practice what they preach! They could have a huge impact on hiring Americans and just plain hiring people because of the financial clout that they have. This “Speak out America” pledge is just another political ploy aimed at saving the fat cats and the corporate cash horders money on their taxes. It has little to do with hiring Americans, or they would simply put their money where their mouth is.

Reply

October 08, 2010 at 11:32 am, Robert said:

Jon commented “The number one request on the republican “Speak out America” is stop giving TAX breaks to outsource jobs… How about tax incentives to hire US citizens and bring outsourced jobs back to this country”

How about this: Republicans (many of whom are backed by and are lobbyists for the super rich and big corporations) should simply practice what they preach! They could have a huge impact on hiring Americans and just plain hiring people because of the financial clout that they have. This “Speak out America” pledge is just another political ploy aimed at saving the fat cats and the corporate cash horders money on their taxes. It has little to do with hiring Americans, or they would simply put their money where their mouth is.

Reply

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