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Friday, February 24, 2006

ACM Study On Offshoring - Related Perspectives

Some related perspectives on the ACM Study On Offshoring & Job Shifts. I recently wrote that offshoring is not based just on cost advantage or ricardian logic alone. Distinct benefits are propelling the offshoring wave into newer orbits. While the ACM study has been mostly carried out by academics, the finding from within the industry also point to similar conclusions on multiple fronts :
A recent Mckinsey study finds that offshoring is unlikely to create any sudden discontinuities in overall levels of employment and wages in developed countries. Now the question from an industry perspective is : How different countries would benefit – no doubt India would be the most dominant player in the offshoring scene. Goldman Sachs estimates suggest that the offshore model has penetrated less than 10% of Global 500 IT budgets for core application maintenance and development work and as the Indian companies are expanding into new areas such as network and data-center management, consulting, and business process outsourcing of such departments as human resources and accounting. As far the multinationals leveraging offshore, analysts widely believe there's so much offshore opportunity that the multinationals will have little effect on Indian firms' revenue. The growth may hinge upon the ability to attract talent. Richard Schroth, a senior fellow with Katzenbach Partners, also believes that the multinationals already have so many moving parts that adding offshoring to the mix is likely to be challenging. I earlier wrote about this - you can find them here, here, here and here.
Clearly, seen from an industry perspective, offshore has fully moved into the mainstream from the demand, as well as delivery capability perspective and demand will likely remain very robust. The recently released Mckinsey -Nasscom report puts it so succintly: In the next five years, Indian IT services shall generate US$60 billion in revenue and perhaps sustain 9 million jobs and adds in terms of importance -like oil for saudi, cars for japan, services could be of such importance to india.
Seen from a productivity perspective, offshoring is positively contributing to this productivity growth - given that all major enterprises are actively embracing it - this draft OECD paper assessing offshoring & productivity finds positive correlation between these two - atleast in the service sectors. Technology’s contribution is not just the progress that we see in the conventional sense –it is contributing highly positively to the economy & the expectation is that it should continue to do so in future- all of us - both in the developed and developing world ought to be seized of this and appropriately prepare for the future.

Category :Offshoring,
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