The first time I witnessed somebody lose their job because of software I wrote was difficult. Was I innovating to make things better, or just to make them cheaper? Were my lines of code replacing processes, or people? It certainly wasn’t the first time that a new technology had replaced jobs. Still it made me question what my role as a technologist really was.

Most business professionals will tell you that you can’t keep growing if you don’t streamline. You see this regularly: large companies go through cycles of layoffs because they’ve become too bloated. Streamlining refocuses their attention and almost always initiates new growth. Innovation requires a similar adjustment, whether the innovation is a new marketing strategy or a new corporate intranet.

The point is that after the company adjusts to the new environment it is better prepared for growth. 50 jobs may have been lost in the process, but at least 50 more will be added as the company expands upon the savings of running a tighter ship. Innovation doesn’t always replace jobs. Often it will turn something menial into something more enjoyable and offers new skills to the worker.

None of this is true however with outsourcing. Outsourcing is not innovation, it’s shopping around for a better price for your materials. Just about everybody in the Bush administration has been championing a host of false benefits. John Kerry’s site has a good summary here. Bush made the vague claim in a signed statement that “..When a good or service is produced more cheaply abroad, it makes more sense to import it than make or provide it domestically.” Granted, outsourcing can positively effect your bottom line and leave you with more money to grow. But if nothing other than your financial statements have changed, any growth you achieve will be short-lived and unstable.

Alan Greenspan tried to bring these two ideas together. He suggested that the competition outsourcing creates can itself spark innovation. Indeed competition motivates companies to innovate: i.e. manufacturing a smaller cell phone or deploying a clearer cellular network technology. The competition he speaks of is competition between products and services in a market, not between workers. No amount of innovation is going to change whether or not Americans are paid a fairer wage than Indians or Malaysians.

A recent survey by the Earth Institute at Columbia University confirmed that the motivation is still actual cost savings. Have you called your bank or ISP lately? Earthlink and Citibank certainly didn’t send their callcenters overseas because India offers higher quality services. The jobs went there because they cost less.

The same study offers legitimate reasons for outsourcing, like supplementing a deficit in specialized labor. If there aren’t enough skilled radiologists in America go look elsewhere. That’s not outsourcing it’s seeking the most qualified candidates. I’d argue that customer service too is a specialized skillset - it requires that you can relate to the person you are servicing - and there are plenty of unemployed people in America capable of relating to your customers.