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The Myths and Realities of Offshore Services
24 June 2004
 
Bob M. Hayward   Partha Iyengar   Frances Karamouzis   Ian Marriott   Rita Terdiman   Allie Young   Rolf Jester  

Offshore services are a controversial topic. This report analyzes 13 statements that represent commonly held views on offshore services and offers advice on addressing these issues.







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Pages: 58






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Table of Contents


    
 Analysis

1.0
    
 Introduction

1.1
    
 Loss of Jobs Is a Highly Emotional and Divisive Issue
1.2
    
 Offshore Services Will Cause Massive Disruption
1.3
    
 Dynamic, Modern Economies Require Continual Disruption
1.4
    
 Growing Economies Create More Jobs Than Are Lost
1.5
    
 A Richer World Is a More Secure World
1.6
    
 Safety Nets Are Necessary for Displaced Workers
2.0
    
 Confronting the Issues

2.1
    
 Definition of Offshore Services and Related Terms
2.2
    
 Offshore Services Have Arrived
2.3
    
 The Offshore Services Backlash
3.0
    
 The Offshore Debate

3.1
    
 Some People Will Lose Their Jobs

3.1.1
    
 People Usually Learn Only About Job Losses, Not Gains
3.1.2
    
 Types of Work Susceptible to Moving Offshore
3.1.3
    
 Bottom Line
3.2
    
 Millions of Jobs Have Not Disappeared

3.2.1
    
 Jobs Lost In the United States
3.2.2
    
 Regular Job Churn Is Far Higher Than Any Loss of Jobs From Offshore Services
3.2.3
    
 Most Services Sector Jobs Are Safe

3.2.3.1
    
 Localized Jobs
3.2.3.2
    
 Jobs That Require Special Skills or Qualifications
3.2.3.3
    
 Competing Local Options
3.2.3.4
    
 Offshore Location Constraints
3.2.3.5
    
 Offshore Location Risk
3.2.3.6
    
 Legal Constraints
3.2.3.7
    
 Negative Sentiment Toward Offshore
3.2.4
    
 Bottom Line
3.3
    
 This Is All Happening Faster Than Other Job Disruptions

3.3.1
    
 Services Jobs Can Be Moved Offshore More Rapidly
3.3.2
    
 Opposition Is More Vocal Than in Previous Job Disruptions
3.3.3
    
 Offshore Is Not New
3.3.4
    
 Bottom Line
3.4
    
 Services Jobs Will Continue to Grow

3.4.1
    
 Services Sector Jobs Are the Future
3.4.2
    
 Developed Economies Export Services Too
3.4.3
    
 Trade Leads to Jobs
3.4.4
    
 Future Jobs
3.4.5
    
 Bottom Line
3.5
    
 Jobs Lost Are Usually Replaced

3.5.1
    
 Reduced Costs of Business Leads to Jobs
3.5.2
    
 The Global Economy Is Not a Zero Sum Game
3.5.3
    
 Bottom Line
3.6
    
 Wage Rates Will Not Decline in Developed Economies

3.6.1
    
 The Case for Reduced Wages in Developed Economies
3.6.2
    
 The Case Against Reduced Wages in Developed Economies
3.6.3
    
 Displaced Service Workers Should Not Need to Downshift to Get A Job
3.6.4
    
 Three Assumptions About Deflationary Wage Pressure
3.6.5
    
 Programmers Are a Special Case
3.6.6
    
 Answer: Both Are Right
3.6.7
    
 Bottom Line
3.7
    
 The U.S. Recovery Did Take Longer Than Usual to Create Jobs

3.7.1
    
 Reasons for Delayed Job Growth During the Current U.S. Economic Recovery
3.7.2
    
 U.S. Productivity Rates Are the Main Cause
3.7.3
    
 Bottom Line
3.8
    
 Offshore Services Will Not Worsen Trade Deficits in Developed Countries

3.8.1
    
 Push and Pull Drive Increased Exports
3.8.2
    
 The Benefits of Trade
3.8.3
    
 Cost Factors Are Not the Only Reason to Use Offshore Services
3.8.4
    
 Offshore Services Is Two-Way
3.8.5
    
 So Why Is the U.S. Trade Deficit So High and Growing?
3.8.6
    
 Bottom Line
3.9
    
 National Security and Competitiveness Is Not Eroded

3.9.1
    
 Developed Economies Have Been Dependent on Others for a Long Time
3.9.2
    
 Developed Economy Advantages Cannot Easily Be Duplicated
3.9.3
    
 Dependency Can Be Avoided
3.9.4
    
 The Demographic Challenge
3.9.5
    
 Emerging Economies Have Perhaps Even Higher Risks With Offshore Services
3.9.6
    
 Bottom Line
3.10
    
 The Government Should Act to Cushion Job Loss, Not to Protect Jobs

3.10.1
    
 Reasons Why Legislation Can Cause More Harm Than Good
3.10.2
    
 Protectionism Stifles Innovation and Entrepreneurial Efforts
3.10.3
    
 Tax Changes Can Be Problematic
3.10.4
    
 Less-Regulated Developed Economies Create More Jobs
3.10.5
    
 Highly Regulated Economies May Struggle More to Deal With Offshore Services
3.10.6
    
 Politicians Need to See the Big Picture
3.10.7
    
 Bottom Line
3.11
    
 Going Offshore May Not Always Be the Best Option

3.11.1
    
 The Usual Reasons for Going Offshore
3.11.2
    
 Best Practices for Those Contemplating Offshore Services

3.11.2.1
    
 Sourcing Strategy
3.11.2.2
    
 Management Development
3.11.2.3
    
 Staff Engagement
3.11.2.4
    
 Supplier Evaluation
3.11.2.5
    
 Risk Management
3.11.2.6
    
 Supplier Relationships
3.11.2.7
    
 Transition Management
3.11.3
    
 Bottom Line
3.12
    
 Governments Should Be No Different Than Business

3.12.1
    
 Bottom Line
3.13
    
 World Trade Is Not Fair

3.13.1
    
 Change Is Happening
3.13.2
    
 Bottom Line
4.0
    
 The Appropriate Responses to Offshore Services

4.1
    
 The Corporate Response
4.2
    
 The Government Response
4.3
    
 The Individual Response
5.0
    
 Conclusion
Appendix A.
    
 Acronym Key


List of Figures


Figure 1. 
 Offshore Services Are Growing in Popularity, but Two Types of Risks Are Involved
 

Figure 2. 
 The Media Have Presented a Negative Picture of Offshore Services
 

Figure 3. 
 Job Losses to Date From Offshore Services Have Been Grossly Exaggerated
 

Figure 4. 
 Jobs at Risk
 

Figure 5. 
 Offshore Services Produce Economic Benefits
 

Figure 6. 
 Offshore Service Efficiencies Drive Overall Job Growth
 

Figure 7. 
 Offshore Service Efficiencies Drive Increasing Exports
 



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