Barack Obama started fulfilling his campaign promises and made a first step to return jobs from offshore locations back to the United States. The bill about federal tax changes, that is yet to receive approval in the Senate, will impact IT vendors that run various operations overseas by disallowing deductions for various offshore expenses, including payroll. Thus, it should encourage American companies to hire local employees.

According to President Obama it is the tax code that has played a major role in offshoring growth, including high-skilled information technology outsourcing.  As explained by the U.S. President, America has developed “a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York”.

Some companies had announced their plans to bring jobs back from offshore locations even before tax changes were declared. For example, Sallie Mae, the nation’s largest private student lender, announced it would bring 2,000 outsourced jobs back to America.  However, these are just isolated cases and they are regarded by many experts as a way to curry favor with the new administration.

At the same time outsourcing market analysts believe that the plan will have little to no impact on the IT industry. Such a critical attitude is based on the following consideration: rapid growth in the outsourcing industry was not due to tax breaks but to a huge difference in labor costs for the U.S. and offshore locations. Despite a significant annual increase in wages in China, India and other outsourcing destinations, the salary gap remains large and makes outsourcing as attractive as before. Even against the backdrop of massive cuts by the major US companies, offshore locations are still the place where vendors could find talented technical workforce in sufficient numbers and at affordable price.

Therefore it is very unlikely that Obama’s tax plan can change the present posture of affairs. According to the Hackett Group’s research conducted in December 2008, large companies with revenues of at least $5 billion will move as many as one quarter of IT jobs offshore by 2010.