IT jobs

Got a back-office job? It may be headed overseas

September 12, 2013: 11:23 AM ET

Global companies are sending about 4 million IT, finance, human resources, and procurement jobs to countries where labor costs are lower.

Fotosearch Illustration/Corbis

Fotosearch Illustration/Corbis

FORTUNE -- Anyone wondering why the current economic recovery has featured such stubbornly high unemployment might want to consider this piece of the puzzle: Since 2008, U.S. and European companies have moved an average of 365,000 white-collar jobs to cheaper labor markets each year, for a total (so far) of about 1.5 million.

Some 265,000 more jobs will have been offshored by the end of this year, according to new research by productivity consultants The Hackett Group. The study analyzed data on 4,700 companies with revenues over $1 billion.

In all, the research says, of the roughly 8 million internal business services positions that existed before the recession started, almost half (46%) will have gone abroad by 2017, including 1.4 million jobs in corporate finance and 1.5 million in in-house IT.

The good news -- if it can be called that -- is that, starting next year, the study says, "job losses will continue but will shrink each year, declining to 133,000 jobs lost in 2017."

Of course, moving IT jobs offshore is nothing new, as anyone who's ever spoken with a help-desk person or a customer-service rep in Bangalore or Mexico City knows full well. But the trend has accelerated in the past few years, partly because of the recession, and partly because "companies driven by globalization and market pressures are being forced to change their operating model," says Honorio Padron, a Hackett data analyst and consultant who worked on the study.

How so? "They're consolidating all of their support functions, including finance, IT, procurement, and some human resources roles, into one internal division, usually dubbed global business services, or GBS," Padron says -- and then locating those jobs anywhere in the world where they can get the most productivity at the lowest cost.

Look at Procter & Gamble (PG), for instance. Under Filippo Passerini, the company's CIO, P&G launched its global business services division a decade ago, and it delivers more than 175 different support services to the company's operations in 180 countries. The GBS approach is so much more efficient than duplicating the same services in separate divisions that P&G says it has slashed costs by more than $1 billion.

Some of the staff jobs P&G has cut in the U.S. have gone to India, along with about 40% of all IT, finance, and other offshored positions covered in the Hackett Group study. As India's growing middle class pushes up wages, narrowing the cost gap with the West, will companies bring any of those jobs back?

"Don't hold your breath," says Padron. "There is some anecdotal evidence of 'backshoring' here and there, but expecting it to be widespread is really wishful thinking." The reason, he explains, is simple: "India and China's labor costs are still nowhere near those of the U.S. and Europe. Yes, costs in Asia are rising -- but ours are rising, too."

It's worth noting that, despite the relentless pace of outsourcing, demand for IT skills is so insatiable across so many industries that the job market for techies in the U.S. is robust, with tech unemployment hovering around 3.5%. Moreover, even as offshoring continues over the next three years, many data analyst jobs will stay put, says Erik Dorr, who also worked on the Hackett study.

"If you're skilled in SAP or Oracle, or doing high-level quantitative analysis, or any kind of IT or finance work that is not repetitive or routine," your job is probably safe, Dorr says, adding, "A good data analyst creates value that is an order of magnitude higher than what you pay him or her, so comparative labor costs are less of an issue."

What else are employers moving to the P&G-style GBS model looking for? "If you can manage change, from conception to completion, that is a skill in demand," says Dorr. "Right now, companies' ability to make change happen is constrained by the lack of available talent."

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