The Hackett Group: Acceleration of Offshoring Trend Driving Loss of Millions of Finance and IT Jobs in U.S. and Europe
December 02 2010 - 9:39AM
Business Wire
There’s no end in sight for the jobless recovery in business
functions such as corporate finance and IT, in large part due to
the accelerated movement of work to India and other offshore
locations, according to new research from The Hackett Group, Inc.
(NASDAQ: HCKT). The dramatic job losses seen by U.S. and European
companies in 2008 and 2009 are expected to continue through 2014,
according to The Hackett Group.
The Hackett Group’s latest research found that close to 1.1
million jobs in corporate finance, IT, and other business functions
were lost at large U.S. and European companies in 2008 and 2009 due
to a combination of offshoring, productivity improvements, and lack
of economic growth. Over 1.3 million additional jobs will disappear
by 2014, The Hackett Group found, with offshoring becoming a larger
and larger factor each year. These figures represent annual job
loss rates of close to twice those seen from 2000 to 2007.
Corporate finance in particular is now seeing an acceleration of
this offshoring trend. While IT dominated the mix of business
function jobs lost to offshoring since 2000, growth in IT
offshoring is now leveling off. By contrast, the total number of
jobs lost to offshoring in corporate finance is expected to grow by
a compound annual rate of about 20 percent between 2010 and 2014.
In 2014, the annual number of finance jobs lost to offshore will be
higher than the IT figure for the first time.
The Hackett Group’s latest Book of Numbers research, “Global
Business Services (GBS): Redefining the Enterprise Engine,” finds
that companies are looking at their overall Service Delivery Models
and recognizing that the challenging economic times have presented
them with a compelling environment to make change that will enable
their business to compete globally for the long term. According to
The Hackett Group’s analysis, one of the most important of these
changes is the offshoring trend, which is being accelerated by the
fact that many companies are now creating their own GBS
organizations in India and other low-cost labor markets.
GBS organizations embrace both outsourcing and their own
internal offshore operations, which remain owned and operated by
the companies, to enable a broad array of functions to be moved to
low-cost labor markets and managed in an integrated fashion. Over
the past few years, many companies have become more mature in their
use of GBS organizations, expanding them beyond a basic shared
services approach to manage operations in multiple functional areas
such as IT, finance, procurement, and human resources. By offering
economies of scale, scope, and skill, this approach enables
companies to drive cost reductions and lower headcounts. Companies
are also looking to enable global enterprise operating standards
that will streamline their businesses and drive better overall
results.
“With the modest resumption of economic growth this year,
policymakers throughout the industrialized world have been
struggling to create jobs. But our research shows that across key
business functions, their efforts are simply being overwhelmed by
offshoring and other factors,” said Michel Janssen, chief research
officer for The Hackett Group. “This is what’s driving the ‘jobless
recovery’ we’re seeing in key white collar job categories, and it’s
likely to continue for the foreseeable future. The trend spiked in
2009, when nearly 700,000 jobs in finance, IT, and other areas were
lost to a combination of offshoring, productivity improvements, and
lack of economic growth. We see the number leveling out at around
250,000 jobs lost each year through 2014, and possibly beyond.
That’s a reality that’s nearly impossible to avoid.”
According to Honorio Padron, global business services practice
leader for The Hackett Group, “A number of factors have helped
create this situation. Certainly, the savings that can be generated
by moving jobs to low-cost labor markets is too great for most
companies to ignore. In addition, many companies have become much
more mature in their use of offshore resources. They began with
shared service centers nearly a decade ago, taking basic
transactional areas offshore on a one-off basis. But today we’re
seeing the rapid ascendance of comprehensive cross-functional
Global Business Services operations that are moving far beyond
transactional work, to handle the lion’s share of the support
function for many companies. The result is a globalization trend
from which there’s simply no turning back.”
A Research Insight offering key findings from The Hackett
Group’s GBS Book of Numbers is available free, with registration,
at this link (http://bit.ly/gVrkmH).
About The Hackett Group, Inc.
The Hackett Group (NASDAQ: HCKT), a global strategic business
advisory and operations improvement consulting firm, is a leader in
best practice advisory, business benchmarking, and transformation
consulting services including strategy and operations, working
capital management, and globalization advice. Utilizing best
practices and implementation insights from more than 5,000
benchmarking engagements, executives use The Hackett Group's
empirically-based approach to quickly define and implement
initiatives to enable world-class performance.
Through its REL group, The Hackett Group offers working capital
solutions focused on delivering significant cash flow improvements.
Through its Archstone Consulting group, The Hackett Group offers
Strategy & Operations consulting services in the Consumer and
Industrial Products, Pharmaceutical, Manufacturing and Financial
Services industry sectors. Through its Hackett Technology Solutions
group, The Hackett Group offers business application consulting
services that help maximize returns on IT investments.
The Hackett Group has completed benchmark studies with 2,700
major corporations and government agencies, including 97% of the
Dow Jones Industrials, 73% of the Fortune 100, 73% of the DAX 30
and 50% of the FTSE 100.
More information on The Hackett Group is available: by phone at
(770) 225-7300; by e-mail at info@thehackettgroup.com, or online at
www.thehackettgroup.com.
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