Summary of The Services Shift

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Shipping U.S. manufacturing jobs to offshore destinations is already controversial, but what’s happened so far is just the first wave of “offshoring,” says globalization professor Robert E. Kennedy, writing with researcher Ajay Sharma. A far larger wave is cresting: service offshoring. This is problematic because services now account for a larger portion of the U.S. gross domestic product than manufacturing. Technology is making many high-value services fair game for offshoring. The first wave of service offshoring involved sending relatively low-value services, such as call centers, to India. But now firms are outsourcing even medical jobs, including radiology. This book tells managers why offshoring is moving up the service value chain, how to harness its benefits and what to do about its risks – though the authors might have paid more attention to the disappointing results some companies have derived from offshoring. Despite their stated political neutrality about offshoring, these experts do seem to favor it, as seen in their resigned treatment of job loss concerns and their optimism about the complexities of executing offshoring programs, though they acknowledge that they treat in scant pages procedural matters that have been the subject of entire books. getAbstract recommends their detailed, knowledgeable backgrounder to those who want a lot of very useful information about offshoring, while noting that it may not meet all the needs of managers who call for caution before setting sail.

About the Authors

Robert E. Kennedy teaches business administration and directs the “Global Initiative” at the University of Michigan’s Ross School of Business. He is also the executive director of the William Davidson Institute, where Ajay Sharma is the research manager for the “Globalization of Services Initiative.”



Wave upon Wave

The “services shift” is moving beyond sending call centers and mundane business processes from the U.S. to other countries. Higher-value services are following the first wave of outsourcing that took manufacturing and low-end services abroad. Service offshoring is big and becoming bigger, so every manager must understand it and prepare accordingly. The globalization of services is not just about cutting costs but about achieving high quality and fundamentally reorganizing work. With that base, five compelling forces – which are “here to stay” – drive this wave of offshoring:

  1. “Technological innovations” – This includes widening internet access and digitization.
  2. “Emerging market growth” – Developing nations are selling more services
  3. “Global macroeconomic liberalization” – More nations allow international business.
  4. “The corporate imperative to...reduce costs and improve quality” – Offshoring “can lead to major productivity and quality improvements.”
  5. “Global business culture” – “Western...

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