Linux, PCs and Trump’s ‘Buy American’ problem

By Patrick Thibodeau Apr 24th 2017
Linux, PCs and Trump’s ‘Buy American’ problem
The administration may have more say over who works on federal IT contracts than on where products are made.

Some PCs are assembled in the U.S., but not many. This includes those from Lenovo, the China-based firm that runs a factory in North Carolina. Apple operates a Mac Pro assembly plant in Austin, but makes many of its other products overseas.

Lenovo and Apple may have an edge in selling PCs to the U.S., under President Donald Trump's recently signed "Hire American, Buy American" executive order signed this week, say analysts.

All PCs are made with components sourced globally, but vendors that assemble products in the U.S. may gain preference. Trump's executive order doesn't spell out how "buying American" will work for IT suppliers -- if it happens at all.

The Trump order may have more pull concerning hiring under federal contracts and federally funded projects. Many IT projects are restricted from foreign labor by security clearances, but not all.

The hire American aspect of the order may force firms, and federal agencies themselves, that are using H-1B workers to hire U.S. workers instead.

"I think there will be more scrutiny with regard to who actually performs on the contract," said Katell Thielemann, an analyst at Gartner.

In terms of hardware, in 2004 the government recognized the problems with trying to source tech in the U.S., and it exempted commercial IT projects from the Buy American Act of 1933. But Trump could revisit this waiver, and if he does problems await.

"Think about the prevalence of open source software like Linux across all federal agencies," said Thielemann. "How do you really carve out the piece [of code] that is 'American' -- it's impossible to do."

"The government has information technology that it frankly cannot source from the United States alone," said Thielemann.

Thielemann believes what's at the core of Trump order is a crackdown on large-scale waivers granted as part of free trade deals. These largely affect "large asset classes," such as motor vehicles, steel and cement, and not IT.

Still, vendors may be prompted by the Trump administration's actions to manufacture certain IT systems in the U.S. That may be costly.

"Unless there are radical improvements in technology manufacturing methods, the economics of domestic manufacturing will result in higher end-item prices for technology manufactured in the U.S.," said Ray Bjorklund, who heads federal market research firm BirchGrove Consulting.

"Will the American people be comfortable if the federal government spends more for the same technology products than it did in previous years?" asked Bjorklund.

And will the Trump administration change its purchasing rules in way that favors PC vendors in federal procurement that assemble products in the U.S.?

"I think that what we're all anxiously waiting to see," said Trey Hodgkins. He is the senior vice president at the Information Technology Alliance for Public Sector, an industry group.

The U.S. may leave the IT exemption in place, but if it makes a change vendors are going to have to start assessing how their products enter the market, said Hodgkins.

It also means figuring out just what "Made in the USA" means under any new rules issued by the Trump administration. "Are they assembled here or are they built here entirely?" asked Hodgkins.

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