Offshore Outsourcing: Will the Robust Growth Continue?

Abstract

The growth in offshore outsourcing of jobs from the United States and European Union has been robust. Low-cost countries such as India and China have attracted employment with their impressive skill attainment and cost structure. While the exact number of jobs moved to offshore locations since the beginning of the New Millennium is unknown, it is modest compared to forecasts of more than 15 million by 2015. The reasons for this growth are compelling. Organizations initially viewed offshore outsourcing as a method for reducing costs, especially in their non-core operations, thereby leveraging their resources for more productive, higher-level deployment. In addition to wage and salary levels that were often a fraction of onshore levels, employers were able to shed the high costs of health care, pensions, unionization, and many other expenses that typically accompany employment in Western businesses. The study concluded that, while offshoring will remain attractive, the growth is likely to slow. In the vendor nations, upward wage pressures and a diminishing number of qualified workers will limit growth. In the offshoring nations, political pressures against offshoring will mount as Western economies slow, worker debt levels rise, and well-paying job opportunities decline.