Rating

7

Qualities

  • Applicable
  • Background
  • Concrete Examples

Recommendation

Sending US manufacturing jobs to offshore destinations is already controversial, but what’s happened so far is just the first wave of “outsourcing,” says globalization professor Robert E. Kennedy. A far larger wave is cresting: outsourcing services to offshore destinations. Do you feel your white collar growing tighter? Well, just be glad you’re not a US radiologist waiting for films being read overseas. 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. Despite their stated political neutrality about offshoring, these experts do seem to favor it, as seen in their resigned treatment of job losses 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. This knowledgeable backgrounder offers a lot of useful information about offshoring, though it may not meet all the needs of managers who call for caution before setting sail.

Summary

The five forces that compel increased “offshoring” by US firms are here to stay.

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 likely to endure – 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...

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.”


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