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What Is Offshoring, and Should You Care?

Alan Finger -- Offshoring, offshore outsourcing, offsourcing -- call it what you will, but more and more jobs in the United States are at risk of being shipped overseas.

If your job involves interacting with a computer and/or a phone, and you could telecommute if your boss would let you, then your job is a prime candidate for offshoring.

According to SearchCIO.com, offshoring, "... a type of business process outsourcing ..., is the exporting of IT-related work from the United States and other developed countries to areas of the world where there is both political stability and lower labor costs or tax savings."

The public was first exposed to offshoring when the phone companies sent their directory assistance centers overseas. People would call Information, get a person who spoke English with a foreign accent, and conclude that the phone company had started hiring immigrants for the job. The only clue that these people might not be United States citizens was their lack of geographic knowledge. You couldn't ask them to try the next closest city to the one where they started their search because they had no idea what that city was! Now we know, of course, that those directory assistance operators are actually foreign nationals working in their native countries.

Following the phone companies' lead, many companies have since relocated their call centers overseas, so now customer service and support jobs are moving out of the United States as well.

I would guess the non-technical aspect of the phone answering jobs is the reason there was not much of a backlash when these positions were sent offshore. But now that IT workers and radiologists are seeing their jobs disappear, the politicians are starting to take notice. This acceleration of offshoring has also come at a time when the U.S economy is suffering a so-called "jobless recovery," which exacerbates the working public's negative opinion of offshoring.

Keeping corporate costs down

The companies that are offshoring IT jobs include large ones like IBM and United Technologies, as well as startups like Solidcore, in Silicon Valley, which claims that venture capitalists wouldn't give them a nickel unless they offshored the development of their product, a backup security system for computers.

The companies say they must offshore these jobs in order to contain costs and remain competitive. Their attitude is "if we don't do it, our competitors will."

The driving force behind offshoring is the extreme wage gap between the U.S. and India, the primary recipient of outsourced jobs. The average wage ratio for telephone workers is 12:1. For medical transcribers it's 9:1. Globally, these pay gaps result in about 50% savings for the companies doing the offshoring, once the higher infrastructure and other costs are taken into account. If companies offshored all of the 14 million service jobs in the U.S., they could save about $300 billion a year. It's not difficult to understand their attraction to offshoring.

Some economists and CEOs (and heads of the President's Council of Economic Affairs) have attempted to downplay the significance of these job losses in the U.S., but the Bureau of Labor Statistics has released a study that projects the kinds of jobs that will be created in the U.S. between now and 2012. Most of the new jobs will be in health and information technology, require little education, and pay below average wages. A company in Cambridge, Massachusetts, decided to offer unemployed U.S. computer programmers "offshore wages," which, of course, they were happy to accept!

If you think your job can't be offshored, think again. If your job is routine enough that it can be described in a spec sheet and contracted out, there's no reason to believe that contract wouldn't go where it's least expensive to fulfill. Then your job joins the offshored ranks, and YOU join the ranks of the unemployed!

Alan Finger is the Webmaster at Change Careers On the Net, and has been through a few career changes of his own. Now he'd like to be able to help other people navigate the career changing waters. He can be reached at alan@ChangeCareersOnTheNet.com.

© 2004 Alan Finger

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