By Will Sturgeon, 22 October 2004 17:30
NEWS Offshoring is benefiting companies, countries and economies on both sides of the debate, according to attendees at the Better Management Live Conference in Las Vegas this week.
Technology companies in Europe and the US claim the offshoring 'kick-back' is the creation of new jobs in their domestic market which are "higher up the economic value scale" than those jobs which they have sent to countries such as India.
While on an individual-by-individual basis there are clearly those who will be worse off, in general this is having a positive effect on Western economies and workforces, according to Nigel Holloway, director of executive services at the Economist Intelligence Unit, who quoted McKinsey figures.
Chip Greenley, VP marketing and solutions at HP, said: "From a generic perspective it has to be good for the global economy."
Greenley and representatives from other vendors, said cost savings associated with offshoring are being reinvested in the creation of more high-value roles in the domestic market.
"We have taken large chunks of our business and moved them overseas," said Greenley. "If we know that by offshoring our accounts payable handling we will create the budget to hire 200 new hardware and software engineers then I can tell you it is going to happen."
Art Cooke, president of SAS International, agreed with such a strategy.
"We try to do the sensible things and do what is best for us," said Cooke, who said that may include outsourcing some "background work" but warned against outsourcing any development of core business or handing over the reins on any project linked to the growth of the company.
Cooke added that those who are currently getting heated about a large number of less skilled jobs going overseas are guilty to some degree of a lack of ambition and expressed surprise that in "a knowledge economy" there is such anger over the loss of back-office jobs.
"Would people really rather their son or daughter was studying how to programme some small part of an ERP system or working towards something genuinely innovative and cutting edge?" he said.
Cooke believes the fright of the offshoring phenomenon should encourage Western economies to remember to keep innovating and generating invaluable new skills sets.
"If an economy isn't going to innovate it deserves everything it gets," he said.
Comments
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1. Zilch Zender
"Cooke added that those who are currently getting heated about a large number of less skilled jobs going overseas are guilty to some degree of a lack of ambition and expressed surprise that in "a knowledge economy" there is such anger over the loss of back-office jobs."
Don't tell me because you can save some money by selling out your skilled workers in the US that the American people are not ambitious. Since when is programming a lesser skill? For corporate executives to have any say in how their money grubbing schemes are helping society is a joke.
2. anonymous
When these fundamental skills have been lost to the developing economies, due to short sighted outsourcing plans, how do companies expect innovation to exist without these fundamental skills ?
3. anonymous
What a totally ignorant and arrogant thing to say. Companies are offshoring because it is cheaper to do so, end of story. They are not hiring more qualified persons nor are they investing in training or retraining of those people who are in the position of having their job outsourced. Profit is / was and always will be, king.
4. Barry Whitesides
An interesting article. As someone who is having their Network management job outsourced to Brazil, and as someone who has a recent college graduate looking for work, I think the impact of Offshoring should be reviewed in light:
> Of the Cultural differences between "home" markets and the outsource country in terms of project management, documentation, task prioritization and urgency which are vastly different.
> Of the impact on Colleges which lose "partnership" with business in developing training that corelates to business needs
> Of the impact on Development of the training for the "higher level" jobs when the entry positions have departed and the corporate training structure has been dismantled
> The disconnect between the "higher level" positions (Managers) and the "back office" positions (Execution) in monitoring the cohesion of Operations and Strategy
> The inclusion of Customer Service, Development, Network Management and Deployment as "back office" positions to be offshored instead of core technology
> I would also revalidate the proposition that domestic investment is increased as a result of offshoring. My own experience is that the "higher level" management jobs tend to follow, and that the goal is reduced cost and ROI not the generation of capital for domestic investment. The money is lost to the domestic market.
5. anonymous
"by offshoring our accounts payable handling we will create the budget to hire 200 new hardware and software engineers" But then we will offshore the hardware and software engineers to create the budget to fund what? Follow the logic and it turns on itself like a self-eating snake. Hmm, where have I seen that analogy before?
Plain and simple offshoring represents the fleecing of America once again. By moving expertise offshore we will grow to be a renters ecomony that only knows one thing: "you want fries with that!".
Ask yourself, why does US tax law favor International investments like offshoring at the expense of US jobs? Where are the actual numbers that show benefits of offshoring to the United States. The unemployment numbers are clear and easy to find.
The most disturbing thing is the notion that someone might actually believe this crap.
6. anonymous
Nobody really believes it, but investors want it for short term returns and executives want it for savings bonuses. They are too greedy and short sighted to realize that sending jobs overseas might provide cheaper products for import, but with less income in the U.S., there will be no savings. There is also the diminishment of the tax base to consider, less money for national defense. All this time, the Patriot Act protects the Northern border while ignoring the Southern border (ever read the text? Only the Northern border is specified.)
CEOs, boards of directors, and business owners who offshore ought to have their own jobs offshored, while we are at it, lets offshore government... oh, wait. We already have.
7. anonymous
All offshoring companies should be fully taxed to compensate for the loss of revenue to the UK. Some of the money collected could be used to help people set up small businesses that would, in turn, provide alternatives to the multi nationals and large businesses.