Offshore outsourcing will continue at brisk pace for next four years, then ease up as automation replaces offshoring as a way for companies to save money, a new study says.
Slideshow: IT Salaries: 9 Ways We've Changed From 2001
(click image for larger view and for slideshow)
Mounting political pressure will do little to stop the flow of technology and other jobs moving offshore to low-cost destinations like India and China, new research indicates.
Some 750,000 jobs in IT, finance, and other business services will be offshored from the U.S. and Western Europe to developing nations between now and 2016, according to a study released this week by the Hackett Group. Among the positions going overseas will be 270,000 IT jobs.
"In the U.S. and Europe, offshoring of business services and the rapid transformation of shared services into Global Business Services have had a significant negative impact on the jobs outlook for nearly a decade," said Hackett Group chief research officer Michel Janssen, in a statement. "That trend is going to hit us hard in the short term."
Even more stunning is the researchers' assertion that only about half of the 8.2 million services jobs that existed in the U.S. and Western Europe as of 2002 will exist in four years. A total of 2.3 million business services jobs, including 1.1 million IT jobs, will have gone offshore in by 2016 since the trend started in the 1990s.
Offshore outsourcing is a boon to regions like Asia, South America, and Eastern Europe—but only for so long, the Hackett Group said. While jobs that have gone offshore won't be coming back to the U.S., many of them won't exist at all, anywhere, in a few years, as automation increases and corporations get better at doing more with fewer workers.
"After the offshoring spike driven by the Great Recesssion in 2009, the well is clearly beginning to dry up. A decade from now the landscape will have fundamentally changed, and the flow of business services jobs to India and other low-cost countries will have ceased," said Janssen.
By 2016, the majority of all the jobs that can go offshore will have gone offshore, the group said. And a good portion of those jobs, such as transaction processing, will eventually be eliminated altogether through technology and efficiency improvements. New jobs created domestically through economic growth and innovation in Western economies, such as business analysis, will not be suitable for offshoring.
Despite predictions that the offshoring of hundreds of thousands of more jobs is inevitable, political opposition to offshore outsourcing is heating up as job growth remains sluggish in the U.S. and the November Presidential election draws near.
In an effort to encourage more businesses to locate or keep their customer service operations in the United States, U.S. Rep. Tim Bishop (D-N.Y.) last month introduced a bill in Congress that would penalize companies that place customer call centers offshore. On Tuesday, Bishop said the U.S. Call Center Worker and Consumer Protection Act is gaining momentum and now has 80 co-sponsors in the House, including seven Republicans.
"The most powerful argument for my bill has been an absolutely remarkable lobbying effort taking place on Capitol Hill from particularly the Filipino government but also the government of India," Bishop said on a conference call with reporters. "What it says to me is if U.S. call center jobs going offshore is that big a component of the Filipino economy or the Indian economy, then we're losing a ton of jobs over there. We know we've lost at least 500,000 over the last four years."
Bishop's bill would prohibit companies that place call centers offshore from receiving federal grants or guaranteed loans. The bill also requires the Department of Labor to maintain a publicly available list of companies that operate offshore call centers. And it forces offshore call center workers to disclose their location to consumers and transfer them to a U.S.-based agent on request.
Many similar bills introduced in the past have failed to even make it to the House floor for a vote. Asked by InformationWeek if he was confident his bill could succeed, Bishop said, "I didn't say I have confidence … It's just a matter of putting the issue before my colleagues and the American people and maybe someday wisdom will prevail."
Nominate your company for the 2012 InformationWeek 500--our 24th annual ranking of the nation's very best business technology innovators. Deadline is April 27. Organizations with $250 million or more in revenue may apply for the 2012 InformationWeek 500 now.
InformationWeek Must Reads Oct. 21, 2014InformationWeek's new Must Reads is a compendium of our best recent coverage of digital strategy. Learn why you should learn to embrace DevOps, how to avoid roadblocks for digital projects, what the five steps to API management are, and more.