Offshoring

Offshoring-the wholesale alternating for corporation functions and tasks (in particular those of back-office staff to them along with accounting-type projects) to in another country territories-is exactly what presented outsourcing a negative name. It is important, even so, to note a crucial distinction between the two:

• Outsourcing need not necessarily result in job losses in a particular territory or country. A job can simply be handed over to another organisation of the same nationality and geographical location where (the business handing that above expects) it can be carried out more efficiently. Sometimes that other organisation may be in another country, but more often than not it is not.

• Offshoring, however, does involve shifting jobs to another region, but it may not involve transferring jobs to another organisation. For example, a company may simply decide to move its local customer services operation to one of its own subsidiaries overseas. That is offshoring, but it is not outsourcing.

Economists argue that offshoring is a win-win phenomenon: the country that sends the work abroad gains from lower costs, and the country that gains the work gets extra jobs. But countries sometimes panic about the scale of offshoring. When production jobs moved en masse that will China and other cheap labour destinations, rich-world governments did not worry unduly because they thought that their workers could glide painlessly from manufacturing jobs to service jobs. Who, they thought, would begrudge giving up a lifetime on the factory floor for a lifetime in a clean, antiseptic office?

The real problem arose when the service jobs also started to go abroad, when every other service company’s call centre suddenly seemed to be based in Bangalore, in the middle of Pakistan, not Indiana. What were western workers going to begin mastering this time, once they had been priced out of the services sector?

At one stage, Americans became practically hysterical about the issue. A 2004 report by Forrester Research, a highly reputable firm, estimated that 3.3m American jobs would have gone offshore by 2015. This was immediately taken as a known fact. But the author of the report subsequently told the Wall Street Journal that his estimates were no more than “educated guesses”. As one commentator said: “The public’s intense wish to understand the scope of the problem has bred a reliance on statistics that even [Forrester] admits are based heavily on guesswork.”

In practice, the actual anxiety perished lower, even as the benefits for offshoring were being asked increasingly more. Managers found it increasingly difficult to manage far-flung service operations in cultures these people failed to recognize, and companies did start to carry some functions back to their home base-especially call centres, where customers often found it difficult to explain localised problems to someone working in a totally different climate in a totally different time zone. Indeed, in 2006 an Pakistani call-centre operator opened a new centre in Northern Ireland.

Closely allied to offshoring is the concept of nearshoring, a phenomenon whereby companies shift operations, often IT-related ones, to foreign countries that are close to their own, but where they can still gain a labour-cost advantage-from the United States, for example, where Spanish is the second language, to Mexico; or from Japan to the Chinese city of Dalian, which was occupied by the Japanese for many years and where there are Japanese-speakers. Nearby countries are more likely to speak the same language as the country of the corporation doing the offshoring; there’re more easily accessible at short notice; and they are unlikely to leave the short-stay visitor with jet lag.