Offshoring of back-office jobs to level off, study predicts

Employers continue to move business services jobs from the US and Europe to low-cost countries, but research by The Hackett Group, a global business consulting and finance strategy firm, suggests that the number of IT, finance, human relations and procurement jobs that can be offshored is shrinking.

By 2016, only 1 million of the 4.5 million remaining business services jobs in the US and Europe could be moved to low-cost countries, according to a recent Hackett Group report.

More than a decade of offshoring and productivity improvements has decimated the number of corporate business services jobs that involve transaction processing. Many of the new jobs that have been created through economic growth in the high-cost countries involve controlling and analysis, functions that are less suitable for offshoring.

“This decline has far-reaching implications for India, China and Eastern Europe,” the report reads. These low-cost markets, in particular, have been at the receiving end of offshoring. But in the next few years, the report says, they “will need to develop alternative sources of demand in order to maintain growth in the offshoring/outsourcing business services industries that have energized their economies.”

India, China and Eastern European countries will have to stimulate domestic demand.

Nearly half of about 8 million full-time business services jobs have disappeared in the US and Europe since 2002, either through offshoring or productivity gains, according to The Hackett Group, which analysed financial reports of publicly traded companies with more than $1 billion in annual revenue.

The economic crisis that started in 2007 in the US accelerated the shrinking trend. In 2012, the number has stabilised to about 150,000 business services jobs moving offshore per year, according to the Hackett report.

The job markets evolved along the way. In IT, which has been hit particularly hard by offshoring, different kinds of jobs were created as companies went from making technology to buying it.
 
—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.