Offshoring in eye of beholder

A new study finds that only 1 percent of services jobs in developed countries are expected to be shipped offshore by 2008, but the numbers aren't so negligible in technology.

Consulting firm McKinsey's study projects, for example, that total employment in the information technology services sector will reach 6.9 million in 2008, and 770,000 jobs (13 percent of sector employment in developed countries) will be performed offshore in low-wage countries. That's up from 371,000 IT services jobs performed offshore in 2003. As much as 44 percent of all jobs in the sector potentially could be performed remotely, equivalent to 3 million employees, McKinsey said.

And in the packaged software sector, McKinsey projected that an estimated 116,000 jobs--18 percent of sector employment in developed countries--will be performed by employees in low-wage countries by 2008, compared to 44,000 in 2003. Nearly half (49 percent) of the estimated 690,000 packaged software jobs in 2008 could be performed remotely, McKinsey said, the highest of the sectors studied.

Overall, McKinsey concludes that: "In developed countries, offshoring will not significantly impact wages or employment."

But offshoring seems likely to affect tech workers more than others. A report last year sponsored by the Information Technology Association of America trade group on offshore outsourcing of software and IT services indicated that would result in an improved U.S. economy overall.

McKinsey's report finds that employment in packaged software likely will grow in high-wage countries, at a rate of about 1 percent per year, even as the share of employment in the developed world is forecast to decline. McKinsey also lays out a scenario whereby offshoring could trigger faster employment growth in packaged software in richer nations:

"If vendors are able to use global resourcing to offer feature-rich products in shorter lifecycles at potentially lower prices (especially for developing markets), higher product demand can be expected. In this scenario, the effect on developed labor markets will also be significant, with employment growth forecast to be approximately 3 percent per year, or 14 percent growth from 2003 to 2008."

 

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