Stampede or stroll?

Given the polarised nature of the offshoring debate, to some onlookers it may seem that the whole fabric of western civilisation is under threat. The reality is that most jobs will be staying exactly where they are.

An analysis conducted by the University of California in 2003 concluded that the vast majority of US jobs are not suitable to be offshored. Most jobs in the service sector, for instance, require a high degree of personal interaction particularly retailing, catering and personal care. The research found that a maximum of 11% of US jobs are of a type that could potentially be (although not necessarily will be) offshored. These include employment in office support, business and financial support, IT professionals and the legal sector.

While it may afford little comfort to someone whose job has been lost, there is strong evidence that, on balance, offshoring is a beneficial trend. It helps business to compete more effectively, lowers prices, stimulates growth in home markets and also provides a positive boost to poorer third world economies. Clearly, both government and industry must be sensitive to the short-term impact offshoring can cause on individual lives and develop policies to ease difficulty and speed workers’ transition to new jobs.

A passage to India

Contracting offshore labour to developing countries provides them with badly needed foreign investment. And of course, these countries are themselves important consumers of western products and services so developed economies have a healthy self-interest in exporting greater prosperity. Among the developing economies, India is the leading offshore destination by a comfortable margin given its combination of low costs and significant depth in human resources.

India is the world’s fourth largest economy with a labour force of 406 million people, nearly a quarter of which work in the service sector. After the US, India is home to the largest pool of English speaking scientific manpower. Its engineers, scientists, technicians and skilled personnel are among the best in the world and its education system produces well-qualified graduates in high numbers. Little surprise then that it continues to be the number one offshore market in the third world.

Vedior itself has a significant presence in this important market through its subsidiary Ma Foi, the largest provider of staffing services and HR outsourcing in India. Ma Foi has made a specialism of catering for the staffing and HR requirements of foreign companies looking to outsource services to India and its client base includes over 100 companies among the Fortune 500. It has developed a unique engagement model for overseas companies to select and recruit the right talent to staff their operations.

Offshoring and its impact on the recruitment industry

Whatever its impact on the global economy, there is also a view that offshoring is potentially detrimental to the global recruitment industry. Even if recruitment companies such as Vedior are able to recapture jobs moving offshore through their international networks, the argument goes that they will be more lowly paid jobs compared to the market they originated from. This will, therefore, have a draining effect on the recruitment industry’s sales and profitability.

However, this view presupposes that offshored jobs are not replaced in home markets which, as most prevailing research demonstrates,
is not the case. If, in fact, offshoring has the overall effect that it encourages the culture of outsourcing, creates more jobs and also results in a higher ‘churn rate’ (shorter job tenure), then this is a wholly positive trend for our industry. Recruitment companies with the right market positioning can benefit strongly from the ‘creative destruction’ of jobs caused by offshoring. Those recruitment companies with a network of offices in the key offshoring markets should be able to win a healthy share of the staffing requirements of companies moving manufacturing and services abroad. And recruitment companies that have a strong presence in those sectors of the economy which will see the greatest job creation in the future also have little to fear from the offshoring trend. Of course, if you’re over-exposed to the wrong market and the wrong sector than you may have some cause for concern!

I am confident that Vedior is in a strong position to benefit from the offshoring trend and believe that it provides us with a considerable long-term opportunity. We already have established networks in the leading offshore markets including those in the Far East, Eastern Europe and Latin America. Vedior also happens to be the global market leader in professional/executive recruitment which is precisely where job growth is anticipated to be strongest.

Whether you are in favour of or against the offshoring phenomenon, one point on which most people would agree is that it is not going away. And, given the dramatic decline in working populations forecast among the G8 countries, we should very much hope that it doesn’t go away. Unless industry is better able to distribute work on a global basis, those countries responsible for the majority of the world’s wealth creation will be crippled by skills shortages. Global prosperity depends on improved labour mobility and flexibility. I believe offshoring will play a vital role in enabling business to cope with these future challenges.