Off-shoring

27 Nov

 

Further to the employment trend discussed in my earlier post, and the outsourcing article of ronanisbp, I want to discuss the state of the off-shoring side of outsourcing. Off-shoring has once again come under the spotlight; it has been an emotive topic within the context of the 2012 U.S. Presidential Campaign, as it was in 2004. Indeed, the very prevalence of the topic in the 2004 election highlighted it as a considerable option for ‘every manager in America’.

 

The tendency exists to see off-shoring in negative terms, of Western jobs going overseas. It is clear however, to some commentators at least, that this view is simplistic. The emotive response generated by the threat of off-shoring seems to detract from efforts toward genuine research of off-shoring and its implications. My brief research of the topic suggests that the direction of off-shoring has been very difficult to predict.  A little history – Information technology workers in India reported double-digit salary growth in 2003, prompting commentators concerns that India might price itself out of the offshore market. At the time, India was responsible for an estimated 80% of off-shoring work, and inevitably, this led to rapid growth and rising wage levels for the skilled personnel in demand. –  A large English speaking population coupled with the availability of key personnel, such as engineers, set the stage for this success.

 

Accompanying these early concerns that India might price itself out of the outsourcing industry were expectations of competition from emerging economies – China in particular. Similar articles appear throughout the past decade heralding rise and demise for Chinese and Indian off-shoring respectively. In 2010, CIO offer a very insightful and useful comparison based on 24 key measures, suggesting key differences between the two.

http://www.cio.com/article/640363/Offshore_Outsourcing_24_Ways_to_Compare_India_vs._China?page=1&taxonomyId=3195

 

In summary, it would seem that India holds an advantage in that it is already established, and prevails in terms of language and business process facilities, and knowledge process outsourcing. In addition, India has much stronger cultural affinity with the West, a British-based legal system etc. China, on the other hand has lower labour costs and so far, low inflation. Buyers see access to the local market and co-location with manufacturing facilities as important reasons for outsourcing to China.

 

In many respects, today’s analysis of the situation is similar in variance to the views of a decade ago, and a decade is a significant period in this age. A cursory glance through contemporary commentary reveals views ranging from the end of off-shoring, a plateau, and predictions of an acceleration of off-shoring to levels unimagined, with the rise and demise of China, Eastern Europe, and India still at the forefront. Perhaps the most useful insight is evidence that India’s recent history has seen it move up the value chain from low cost labour base toward a superpower of the knowledge economy – The figures are staggering in terms of scale of education, and language capabilities, while the key factor in off-shoring to China is often access to manufacturing facilities and local markets (scale equally staggering). Both these points are surely evidence of a future further transition in terms of labour, knowledge, and market.

 

Sources:

http://www.computerworld.com/s/article/9231486/10_hot_IT_skills_for_2013?taxonomyId=14&pageNumber=1

http://www.digitaltrends.com/lifestyle/us-tech-companies-outsourcing-fewer-jobs/

http://www.sramanamitra.com/2010/12/28/top-10-outsourcing-trends-for-the-decade/

http://news.cnet.com/2100-1022-5180589.html

http://www.bbc.co.uk/news/business-12597815

http://errancarmel.blogspot.ie/2010/02/predicting-future-of-outsourcing.html

http://trivcap.wordpress.com/2010/04/13/the-future-of-jobs-part-i/

 

 

 

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2 Responses to “Off-shoring”

  1. billynomates2012 November 27, 2012 at 10:51 pm #

    From my knowledge of offshoring i would be reluctant as a business to adopt it. The cost saving adavtages can be massive but I personally think the risks outweigh the rewards. Political unrest, legality, language barriers, security are just some of the risks associated with offshoring. Would you allow an aspect of your business be offhsored or would you look at other options such as in house or standard outsourcing withing the host country?

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  1. The swing of the pendulum: Welcome to the age of “Reshoring” « So Opinionated … - November 29, 2012

    […] to stimulate the US economy; consequently SMEs are reshoring their production and IT workers. Cliftonmoore gave a good insight into the outsourcing offshore (O&O) markets; India and China being the two […]

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