The corporate drive in the U.S. and Europe to move more IT and finance jobs to India and other offshore sites will continue, with another 750,000 such positions being shifter by 2016. But levels of additional offshoring will begin to decline by 2014.
And, according to new research from the Hackett Group, over the next 8 to 10 years the outflow of those jobs overall is likely to cease "as companies simply run out of business services jobs suitable for moving to low-cost countries."
Hackett's offshoring research examines data on 4,700 U.S. and European companies with $1 billion or more in annual revenue, finding that a total of 2.3 million jobs in finance, IT, procurement, and HR will have moved offshore by 2016. That includes nearly 800,000 finance jobs.
India Getting 40%
The research shows that the 2.3 million represents about a third of all jobs in these areas, and notes that India is by far the most popular destination, with nearly 40% of the offshored jobs heading there.
But along the way, in 2014 the picture changes, according to the research, with the 150,000-job-a-year outflow -- including 66,000 in finace -- leveling off or declining then.
The Hackett research finds also that of 5.1 million business services jobs remaining in the U.S. and Europe in 2012 -- including slightly more than two million in finance jobs -- about 1.8 million have the potential to be moved offshore, with 750,000 of those moving by 2016. In those totals, nearly 705,000 of the 1.8 million, and 328,000 of the 750,000 are in finance.
Still 'Hitting Us Hard' in Short-Term
"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 major factor driving business services job losses in the U.S. and European," according to Hackett.
Michel Janssen, Hackett's chief research officer, says that the 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."
He adds that related cost-control challenges will be great for U.S. and European companies, which now on increased offshoring to help drive down costs in IT, finance, and other business services areas. "But other opportunities for improving efficiency still exist, particularly automation, and end-to-end process improvements to streamline how business services are provided."
This story, "When Will the Offshore Flow of IT and Finance Jobs End?" was originally published by cfoworld.com.