IT Offshoring and the 2012 US Presidential Race: Romney vs. Obama

IT Offshoring and the 2012 US Presidential Race: Romney vs. Obama
A look at what will each presidential candidate could do about IT offshore outsourcing.
By Patrick Thibodeau
News Jul 5th 2012

Offshore outsourcing, from the manufacturing to call center industries, has become a major issue in the 2012 presidential race.

Less clear is what these two candidates would do, if anything, about the offshoring of jobs that are among the most critical to the future of the U.S. economy -- IT positions and other highly-skilled, knowledge-based occupations.

IT offshore outsourcing has rarely been raised specifically to date by either President Barack Obama or Mitt Romney, the presumptive GOP presidential nominee.

But both presidential candidates, through their records and actions, appear to have deep knowledge about offshore outsourcing.

Here's how they stand based on their words and actions.

What did Mitt Romney know about offshore outsourcing and during his tenure at Bain Capital?
Before Romney left Bain Capital in 1999, the financial services firm was wired into technology trends, though it didn't always see them correctly.

For instance, Bain invested in (1998-2000), a U.K-based online fashion store that attracted more than $100 million in venture money. perished just six months after launching its Web site, one of the biggest implosions of the dot-com era.

Bain got DoubleClick right, investing in the ad serving company in 1997, shortly after its founding.

Google paid $3.1 billion in 2007 for DoubleClick.

But the election isn't about Bain's venture capital bets. It's about, at least on the margins, whether Romney sees IT offshore outsourcing, or the transfer of high-paying jobs to low-wage countries, as an issue requiring government intervention.

The Washington Post recently reported that Bain has invested in companies that moved jobs to distant shores.

The Romney campaign is attempting to refute this, in part, by arguing some of this happened after Romney left the firm, but that response misses the point.

While at Bain Capital, Romney had a front row seat to many emerging technology trends, including offshoring.

In the early 1990s, Bain invested in Gartner, one of the world's top IT consulting firms, as part of a buyout.

A managing director at Bain, Stephen Pagliuca (who later became a co-owner of the Boston Celtics professional basketball team), was on Gartner's board during Romney's tenure at Bain. At that time, Gartner was certainly closely tracking the beginnings of the offshoring outsourcing industry.

A Bain connected fund, the Information Partners Capital Fund, lists Romney as a group member according to records filed in Delaware, where the fund was incorporated.

What Information Partners was involved in isn't clear, but there are clues.

Information Partners turns up in a reference to Cognizant, one of the largest offshore outsourcing companies in the world.

Venetia Kontogouris, who was on Cognizant's board during Romney's tenure at Bain, says in her bio that she was "senior vice president, venture development, at Cognizant Corporation, where she represented Cognizant in the Information Partners Capital Fund formed by Dun & Bradstreet and Bain Capital."

Kontogouris is a managing partner at Cloud Capital Partners.

New Jersey-based Cognizant, which has more than 140,000 employees, is one of largest offshore outsourcing companies in the world.

It began as a Dun & Bradstreet in-house development services business in 1994 and was split off two years later. D&B owned 51% of the total outstanding shares of Gartner and as part of its spin-off strategy transferred ownership of Gartner to Cognizant, which soon transferred its ownership to another entity.

It was Romney's job to understand technology trends, including offshore outsourcing and to put Bain on a path to take advantage of them. There's nothing in his record to suggest he did otherwise.