Outsourcing and offshoring are among the most widely used terms in our modern age of globalization. Both “O-words” are oftentimes used interchangeably, and there is hardly an agreement on the exact definitions. In general, the main difference is that “outsourcing” is defined as delegation of certain internal business functions to an outside company, whereas “offshoring” implies relocation of business processes to a foreign country, no matter whether they are performed by the same company or not. As recently as five years ago, there was almost a unanimous concern that offshoring of services would ultimately drive thousands if not millions of jobs to India and China. In 2006-2007, experts have been making a number of adjustments in their forecasts, with regard to the number of jobs to be relocated, as well as their destination.

Let’s look at the numbers first. According to Matt McGrath’s “Hot Jobs and Skills” published in Certification Magazine in January 2007, only “about five percent of all IT jobs have been displaced by foreign workers. […] Most of these jobs are lower-level coding jobs, technical support positions or call-center work.” What about other service industries you might ask? Offshoring of other services has been slowing down as well. Mortgage Servicing News, for example, quotes Ross Watts, Senior Vice President of Operations in First American's international services group, saying that despite cost-effectiveness associated with offshore outsourcing of services, wage and salary inflation are becoming “an issue” in such cities as Bangalore and Mumbai, India. As a result, the list of popular offshoring destinations is expanding beyond China and India.

In 2006, the Philippines emerged as an alternative to India, offering U.S. companies a new labor pool, where wage inflation is not so steep. Rachael King in “Outsourcing: Beyond Bangalore” names other alternative IT offshoring locations. Russia competes with India as an IT offshore outsourcing location for processes that require high-end developers. Buenos Aires offers low-cost Linux developers. Bucharest provides multilingual employees for one’s security systems and testing software developing needs.

In addition, there is a growing tendency of retracting offshore business, as U.S. companies start to consider not only the cost, but also the quality of services provided. Gary Eastwood in “The Offshore and Nearshore Outsourcing Outlook” lists problems in communication (language barriers and cultural issues), logistics and security concerns, as well as the growing competition between the onshore and offshore teams, as parts of the new offshore equation. Eastwood turns to so-called “nearshoring,” i.e. U.S. companies outsourcing operations to Canada, Mexico, or the Caribbean, as a new alternative to offshoring that allows to minimize its negative aspects.

As outsourcing and offshoring, two key phenomena of the modern age of globalization, seem to be undergoing constant transformations, local manufacturers and service providers are invited to join the World Trade Center of Greater Philadelphia on February 15, 2007 at the Fourth Annual Global Business Outlook Conference “Global Realities of Outsourcing and Offshoring,” organized by the World Trade Center of Greater Philadelphia and Drexel University’s LeBow College of Business.

Sources

• “Hot Jobs and Skills.” Matt McGrath. Certification Magazine, January 2007. P. 18-23.
• “Offshoring Evolves as Cost of Overseas Talent Rises.” Mortgage Servicing News, November 1, 2006. Vol. 10, Issue 9. P. 8.
• “Outsourcing: Beyond Bangalore.” Rachael King. Business Week Online, 12/11/2006. Database: Business Source Premier.
• The Offshore and Nearshore Outsourcing Outlook: Key locations, outsourcing models and the leading players. Gary Eastwood. 2005.

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Fourth Annual Global Business Outlook Conference "Global Realities of Outsourcing and Offshoring"

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