I recently read an article in one of the magazines that said, ‘Offshoring of back office jobs to level off’. This article explains why this statement could be incorrect.
While it is evident that there have been fluctuations in the offshoring market, it should be noted that more than a decade of offshoring and productivity improvements has increased the number of corporate business services jobs that involve transaction processing. Many of the new jobs that have been created through economic growth in the high-cost countries involve controlling and analysis, functions that are suitable for offshoring.
While it appears that more and more jobs are moving to low cost countries, there is already a growing trend of high end jobs that are created right here in the United States to fulfill the needs of developing low cost countries. This is explained in detail in point number 3 given below.
The changes in offshoring market can also be justified using the data given below:
- Offshoring is all about supply and demand. So long as there is a less expensive way of providing value to customer companies will find a way of solving it.
- India and China are not going away because together they have 10 times the number of people (middle class already) that can do the back office and manufacturing work that can be done at a more expensive cost in the developed countries in the Europe and Americas.
- We in Vantage Agora believe that the term ‘Low Cost Countries’ is going to go away and will be replaced by ‘Regions of Optimal Cost’. For example a back office processing company in India will be using marketing, legal, call center services to service its US customers where as companies like HP and IBM that might be manufacturing hardware in China and selling it into rural villages in India might be moving its customer support for these villages to be completed in the region itself. It might choose legal and marketing companies in the that region.
While Offshoring has undoubtedly contributed to the economic growth of many countries, the same is bound to happen with global efficiency back home in the U.S. These results will be seen very soon in the U.S.
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-By Harsha Chaturvedi (COO, Vantage Agora Inc.)