by Beth Bacheldor

More U.S. Companies are Offshoring More and More

Apr 25, 2011
Enterprise Applications

U.S. Commerce Data shows offshoring is up. The question is, good or bad?

This is worth repeating. In case you missed the excellent article, “Big U.S. Firms Shift Hiring Abroad: by David Wessel in the Wall Street Journal that slices and dices numbers from the U.S. Commerce Department, here’s a recap: U.S. companies continue to offshore work. In fact, they are offshoring a lot.

According to the article, data from the U.S. Commerce Department shows that U.S. companies cut their work forces here by 2.9 million during the 2000s while increasing employment overseas by 2.4 million. Take a snapshot look at 2009 — U.S. companies had 21.1 million people working for them here, and 10.3 million working for them elsewhere in the world (including growing ranks of higher-skilled foreign workers, the article notes).

Either way you look at it, the numbers can’t be good for the U.S. At first glance, I think of all those still out of work, and the many more under-employed, in our country. I think about how horribly our economy spiraled downward and is still floundering, going on three years since the recession hit. I mean really, how much more outsourcing of jobs can the United States take before a recovery becomes next-to-impossible?

On the other hand, if companies outsource to find more economical services, and those services are more and more being found abroad, what’s a smart, financially-savvy company to do? Raise the costs of their goods and services in order to afford the more costly U.S. employees and then gamble: will consumers pay more for their goods and services because more consumers have jobs or will they lose out because consumers bargain shop too (everything made in China by Chinese manufacturers and sold here for less is largely driven by the huge demand for all that cheap stuff). Offshoring promises to help U.S. businesses cut costs where they can, so they can stay competitive and stay in business.

I know I’m painting over-simplistic pictures of both sides of the argument, but really, isn’t that what this all comes down to? If any of us can get something better and cheaper, aren’t we going for that option? Even if it means the purveyor of the better, more expensive item goes away? (Notice that in both scenarios I’ve kept the quality, because the outsourcing providers are in business, and know that they can’t just offer cheap. They have to offer good too.)

But in all sincerity, the problem is complex. Even the U.S. Commerce Department’s numbers aren’t simple. The Wall Street Journal article astutely points out that there are significant differences hidden in the government data. Some companies have cut employment here and abroad, others are hiring equally around the world. And yes, some have cut here while adding abroad.

Take the example given in the Wall Street Journal article. GE cut 1000 workers overseas and 28,000 workers here between 2005 and 2010. Ouch. But wait… in 2000, only 30 percent of GE’s business was overseas. Today, 60 percent is. The employee roster actually better reflects that business ratio than it used to – in 2000, 46 percent of GE employees were overseas. Today, 54 percent are.

The government numbers don’t reveal too much about the types of jobs, either. According to the article, the government plans to release more details about various industries and countries in November.

I don’t think I’ve come to a conclusion personally as to what’s best. I see the pros and cons, I try to understand and accept the nuances. What I do know is that offshoring will not go away. The cat is out of the bag. What I don’t know is how offshoring will ultimately affect the United States. I’m hopeful that U.S. businesses will stay competitive, the U.S. workers will grow in numbers and skills and opportunities and smarts, and that the United States will be a beacon for many years to come, as it has been for so many years before.

So, what say you, readers? Good or bad?