India is by far the most popular destination, with nearly 40 percent of the jobs that are sent offshore headed there.
Corporations in the U.S. and
Europe will move an additional 750,000 jobs in IT, finance and other business
services to India and other low-cost countries by 2016, according to a new
report from business advisory and operations improvement consulting firm The
However, the study notes
that levels of additional offshoring in these areas will begin to decline by
2014, and in the next eight to 10 years, the flow of jobs offshore is likely to
cease, as companies simply run out of business services jobs suitable for
moving to low-cost countries.
The Hackett Group's
offshoring research, which examined available data on 4,700 U.S- and
Europe-based companies with annual revenue of more than $1 billion, found that
by 2016, a total of 2.3 million jobs in finance, IT, procurement and human
resources will have moved offshore. This represents about a third of all jobs
in these areas. India is by far the most popular destination, with nearly 40
percent of the jobs that are sent offshore headed there.
The Hackett Group sees
additional offshoring levels in business services, which are currently at
around 150,000 new jobs each year, leveling off or declining after 2014. The
research also found that of the 5.1 million business services jobs remaining
onshore at U.S. and European companies in 2012, only about 1.8 million have the
potential to be transferred offshore, with 750,000 of those moving by 2016. So
by the end of the next eight to 10 years, the traditional model of lifting and
shifting work out of Western economies into low-cost regions will cease to be a
major factor behind business services job losses in the United States and
Hackett's research also
found that automation and other productivity improvements are another major
factor driving job losses in business services at U.S. and European companies.
Automation and other productivity improvements will have caused the elimination
of 2.2 million business services jobs at these companies between 2006 and 2016,
and these factors are currently driving the elimination of around 200,000 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 Michel Janssen, chief
research officer for The Hackett Group. "That trend is going to continue
to hit us hard in the short term. But after the offshoring spike driven by the
Great Recession 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."
Jansen said the situation
presents a challenge for U.S. and European companies, that have come to depend
on increased offshoring to help drive down their costs in IT, finance and other
business services areas, but other opportunities for improving efficiency still
exist, particularly through automation and end-to-end process improvements to
streamline how business services are provided.
According to Hacketts 2012
Key Issues research, companies are currently adapting their business models and
priorities in response to economic changes in regional global markets. The
study concludes that companies need to fully understand the benefit of adopting
global standards and organizational models that allow optimal execution by
leveraging both skill and scale more broadly.
volatility in demand across global regions has also made it more critical than
ever for companies to truly understand how each region should operate while
still gaining the advantages that come from a global process operating platform,
according to the report.