New Hackett Research Forecasts Offshoring of 750,000 More Jobs In Finance, IT, Other Key Business Services Areas by 2016
March 27 2012 - 9:30AM
Business Wire
Corporations in the U.S. and Europe will move an additional
750,000 jobs in IT, finance, and other business services to India
and other low-cost geographies by 2016, according to new research
from The Hackett Group, Inc. (NASDAQ: HCKT). But levels of
additional offshoring in these areas will begin to decline by 2014,
and in the next 8-10 years the flow of jobs offshore is likely to
cease, as companies simply run out of business services jobs
suitable for moving to low-cost countries.
The Hackett Group's offshoring research, which examined
available data on 4,700 companies with annual revenue over $1
billion headquartered in the U.S. and Europe, found that by 2016, a
total of 2.3 million jobs in finance, IT, procurement, and HR will
have moved offshore. This represents about one third of all jobs in
these areas. India is by far the most popular destination, with
nearly 40 percent of the jobs being offshored headed there.
But The Hackett Group's research sees additional offshoring
levels in business services, which are currently at around 150,000
new jobs each year, leveling off or declining after 2014. The
Hackett Group's research also found that of the 5.1 million
business services jobs remaining onshore at U.S. and European
companies in 2012, only about 1.8 million have the potential to be
moved offshore, with 750,000 of those moving by 2016. So by the end
of the next 8-10 years, the traditional model of lifting and
shifting work out of Western economies into low cost geographies
will cease to be a major factor driving business services job
losses in the U.S. and Europe.
Hackett's research also found that automation and other
productivity improvements are another major factor driving job
losses in business services at U.S. and European companies.
Automation and other productivity improvements will have caused the
elimination of 2.2 million business services jobs at these
companies between 2006 and 2016, and these factors are currently
driving the elimination of around 200,000 jobs annually.
"In the U.S. and Europe, offshoring of business services and the
rapid transformation of shared services into Global Business
Services, have had a significant negative impact on the jobs
outlook for nearly a decade," said The Hackett Group Chief Research
Officer Michel Janssen. "That trend is going to continue to hit us
hard in the short-term. But after the offshoring spike driven by
the Great Recession in 2009, the well is clearly beginning to dry
up. A decade from now the landscape will have fundamentally
changed, and the flow of business services jobs to India and other
low-cost countries will have ceased."
"This situation presents a challenge for U.S. and European
companies, who have come to depend on increased offshoring to help
drive down their costs in IT, finance, and other business services
areas," said Mr. Janssen. "But other opportunities for improving
efficiency still exist, particularly automation, and also
end-to-end process improvements to streamline how business services
are provided."
According to The Hackett Group's 2012 Key Issues research,
companies are currently adapting their business models and
priorities in response to economic changes in regional global
markets. To be most effective, they need to fully understand the
benefit that comes from adopting global standards and
organizational models that allow optimal execution by leveraging
both skill and scale more broadly. But the increased volatility in
demand across global regions has also made it more critical than
ever for companies to truly understand how each region should
operate while still gaining the advantages that comes from a global
process operating platform.
Hackett's research highlights two driving factors behind the
offshoring trend. By far the most important force has been the
consolidation of the delivery of business services into global
business services (GBS) organization, as a next-step beyond shared
services. Having already moved more than 50 percent of their
transactional work into single-function shared services, companies
are now expanding the services into non transactional knowledge
centric processes, and creating multi functional GBS organizations.
The second driver is the broad-based globalization of all aspects
of businesses' operating model. As companies' product/service
lines, go-to-market strategies and supply chains are becoming more
global, the portfolio of business services needed to support these
global operations have become more global as well, so the center of
business services delivery no longer naturally lies in the
traditional domestic market.
The Hackett Group's latest offshoring research is available,
with free registration, at:
http://www.thehackettgroup.com/research/2012/offshoring-update/.
About The Hackett Group
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 7,500 benchmarking studies, executives use The Hackett Group's
empirically-based approach to quickly define and implement
initiatives that 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 over 2,800 major corporations and
government agencies, including 97% of the Dow Jones Industrials,
86% of the Fortune 100, 90% of the DAX 30 and 48% 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.
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