Offshoring May Be Overstated
- From: "Poppy - San Francisco Bay Area" <GoldenStatePoppy@xxxxxxx>
- Date: 14 Sep 2005 08:13:02 -0700
Posted on Tue, Sep. 13, 2005
Offshoring rate may be overstated
By Jim Landers
DALLAS MORNING NEWS
WASHINGTON - From India to Mexico, software programmers, engineers,
call-center workers and CPAs stand ready to take over jobs from their
U.S. counterparts.
And plenty of American businesses hounded by low-cost competitors or
lured by overseas savings are willing to move those jobs offshore.
Yet a batch of recent research suggests there is less hazard to the
work force -- and less money to be saved by employers -- from moving
offshore than you may think.
For example: Many global companies have decided that the optimal
location for research and development is the United States.
"The infrastructure, the market size, the risk profile, access to
talent -- these are very rational reasons why we have such a high
incidence of companies from all over the world placing their R&D
facilities in the United States," said Diana Farrell, director of the
McKinsey Global Institute, the think tank of business consultants
McKinsey & Company.
In the constant churn of the U.S. labor force -- where 5 percent of the
125 million jobs are lost while another 5 percent are created each year
-- service jobs moved overseas have so far had a minor impact, said Ton
Heijmen, senior advisor on offshoring to the Conference Board.
McKinsey's research on the global labor market found 1.5 million
service-sector jobs had moved from the United States and other
developed countries to the developing world by the end of 2003. That
figure is expected to grow to 4.1 million by 2008, Farrell said.
Given all the public debate and anxiety about losing good-paying jobs
to low-wage countries, it's a surprisingly low figure.
"We've only seen the beginning of it. There's enormous room for
growth," said Heijmen.
But both the Conference Board and McKinsey have found many companies
reluctant or unprepared to take advantage of moving jobs offshore.
That's because they know some businesses either lost money or didn't
save anything by moving offshore. A survey of 5,231 firms done last
year by consultant firm Ventoro found 53 percent fell into those
categories.
One area where McKinsey and the Conference Board found a lot of
potential for moving jobs offshore is in the billing, data-entry and
other business process operations of the health care industry.
But Farrell said the research showed health-care providers remain
deeply wedded to paper rather than digital processing, while some
insurance companies are using computers and other information
technology equipment that's more than 50 years old.
Azima Health Services, a Dallas-based firm that specializes in handling
business process operations for health care providers, has concluded
that automation makes more sense than moving jobs offshore.
"Ninety-five percent of the people out there are looking at it," said
Andrew Thorby, Azima's chief executive. "We tried it. But we concluded
fundamentally automation made a lot more sense. It's a far more
compelling and effective business strategy than offshoring."
Other companies say trying to look at the labor market in terms of a
choice between jobs at home or abroad doesn't do justice to their
global business strategies.
"We call it 'allshoring,' not offshoring," said Jess Blackburn of
computer giant Dell Inc.
"Moving jobs abroad is not the way it works," Blackburn said. "It's not
like we shut down an operation and move it outside the United States.
Dell is becoming a much more global company and a global business as
opposed to just a U.S. one."
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