Tuesday, May 22, 2007

Report: Offshoring to Have No Sudden Bad Effects

Source :Eweek.com

While offshore outsourcing is expected to affect wages and employment in developing countries, it won't have any sudden negative impact on developed countries' economies.

The report "Sizing the Emerging Global Labor Market" attempts to find a middle ground between those who argue that nearly all service jobs will eventually move from developed countries to low-wage ones, and those who feel that rising wages in cities such as Bangladore and Prague indicate that supply of offshore talent is already running thin. It attributes these rifts to a confusion surrounding the relatively new global labor market.

In analyzing the potential availability of offshore talent in 28 low-wage nations as well as the likely demand for it in service jobs across eight of the develop world's sectors--IT services, packaged software, retailing, financial services, health care, insurance and pharmaceuticals--the report found that these sectors provided about 23 percent of the nonagricultural jobs in developed country.

Demand for Offshore

The report estimates that 11 percent of these services jobs around the world could be carried out remotely. However, this number can be higher or lower depending on the sector.

The retailing sector, for example, with its large number of customer-facing jobs, only stands to be able to offshore 3 percent of its jobs by 2008, but being such a huge employer, this would be equivalent to 4.9 million positions. The packaged software industry, however, stands to remotely undertake almost half of its jobs in the same time frame, but being a smaller industry, this would be only 340,000 positions.

Offshore Talent Supply

The report argues the developing countries produce far fewer graduates suitable for employment by multinational countries than the raw numbers suggest, though it is quickly growing. The report found 33 million experienced young professionals in developing countries, versus 15 million in developed nations, and 7.7 million in the United States alone. Language gaps, an emphasis on theory versus practical knowledge and a lack of cultural fit are considered hindrances to actually employing much of this offshore talent.