Newsworthy Items

Anchors aweigh - Engineering jobs moving out as globalization strengthens in automation industry
In an earlier article posted with InTech.com the author stated that a number of engineering jobs are being moved offshore. Tom Arrison, senior staff officer at The National Academies in Washington, D.C. stated "it is difficult to measure just how broad the trend is though because employment and trade statistics make it difficult to track when certain markets are going overseas". For the full story please click on the link above.

R&D Offshoring to Rise
Offshoring Times.com reported on February 25 that the IT R&D offshoring market in India is expected to record a CAGR of 23% and is expected to reach $21.4 billion by 2012. The information came from a study done by Zinnov, a consulting firm. Please click on the above link to read the entire story.

Indian outsourcing gains momentum in Australia
According to a report in the February 26, 2009 edition of Offshoring Times. com Australia has been slow to openly embrace India as an outsourcing destination but momentum is building and more organisations are saying they have shipped technology and business process work offshore. Many of the companies that have entered the fray play in the financial services sector, a voracious and aggressive user of information systems and services.

Industry Updates for Today

Europe prefers Indian IT outsourcing
This article highlights the fact that many UK firms are using Indian companies for their offshore IT services. Data also shows an increasing trend in offshoring supported by the fact that 57 per cent of firms polled had utilized outsourcing or offshoring within the last twelve months, compared to 47 per cent last year.

Indian outsourcing market eyes Far East
Indian companies that provide offshoring services have started to look at Japan for new customers. According to a Japan market study by neoIT, an offshore advisory firm, the total IT services sector is estimated to be around $50 billion USD. Currently less than 2 percent of this market is offshored, with China getting the majority share. Revenue from Japan contributes barely three percent of India's total software services exports. Ameet Nivsarka, Vice President, Nasscom, says that he believes Europe and Japan offer huge potential for Indian vendors.

IBM Tops India's Outsourcing Market
This article explains that IBM is outpacing domestic competition with contract wins from large Indian enterprises such as Hindustan Petroleum, North Delhi Power, and IDEA Cellular. This initiative helped IBM capture 10.8% of India's local outsourcing market in 2008, IBM said Tuesday, citing data from Springboard Research. The article goes on to explain that as U.S. sales slow, IBM is investing heavily in developing markets beyond India, including South America and Eastern Europe.

Using the Financial Crisis as a Catalyst for Restructuring

I've been working on an op-ed piece which contrasts two potential responses to the current financial:

1. Hunker down and work to "protect" jobs and current routines, or


2. Use the crisis as an opportunity to shake things up and build for the future

Jim Collins made the case in a recent Fortune Magazine article (link). He cites Boeing and HP after World War II. During a general economic slump, the visionaries running these firms made big bets on the future. Bets that transformed their firms and set them up for decades of success.

Firms today face a similar dilemma. Do they follow the lead of the politicians -- pulling back, "protecting" jobs and buying American? That's the politically correct, but economically wrong, thing to do.

The reality is:

1. The growth markets of the future are largely in developing countries. The World Bank projects that nearly half of global GDP growth over the next 25 years will occur in low-income countries.
   


2. Today's economic slump is a rare opportunity in which top-notch resources (productive assets, people, brands) are available at deep discounts. Are rival firms letting top flight talent go? It's time to grab it. Are rivals pulling out of international markets of cutting back on brand building? Now is the time to fill the void.
   

There has never been a better time to look 5, 10, or 20 years out and make the investments that will set up your firm for success once things get back to normal.
Forward looking firms should use this opportunity to expand globally. If they don't, their rivals will. And the firms who hesitate will be left wondering "what happened?"

Finding new opportunity in offshoring

Bob's book was highlighted in the February 23, 2009 edition of "Smart Brief on Workforce" at SmartBrief.com.

In the News Today

AVON UNVEILS NEW COST CUTS
This article, in the Wall Street Journal (subscription required), reports that Avon is undergoing a restructuring initiative to reduce costs. It references that approx. $200 million of savings will come from product-line simplification and $250 million from "strategic sourcing initiatives, pushing the total from the previously announced restructuring moves to nearly $900 million a year, above prior expectations.

HEWLETT-PACKARD CUTS PAY AS SILICON VALLEY RETRENCHES
HP announced that they are going to reduce salaries across the board in order to maintain their workforce. This is obviously one tact that companies can take to avoid moving jobs outside or offshore.

NISSAN WANTS TO BUILD BATTERIES IN TENNESSEE.
Nissan is requesting a loan to build a Lithium Ion battery manufacturing plant for hybrid cars in Tennessee. They would move production from over seas to the US, a reverse form of offshoring

RUSSIA PLANS TO OUTSOURCE MANUFACTURE OF OIL TANKERS
Due to the shifting of Russia’s oil fields they need to find alternate manufacturers of their oil tankers. Their own ship building industry is focused on military vessels so they are offshoring this project.

NYT Piling On: "Outsourcing of Drug Trials is Faulted"

I am often amazed by the power of memes. It seems that any activity to which the word "outsourcing" could possibly be applied is now a target.

The latest is a story in the Thursday New York Times (link).

The article suggests an ethical quagmire when drug testing is done in developing countries. Apparently some researchers from Duke, and the reporters at the New York Times, want to take choices away from potential drug trial participants in developing countries because they "may be unduly influenced with the promise of financial compensation or free medical care to participate in clinical trials."

This is despite the fact that every leading drug company has detailed "human testing" requirements to make sure that participants understand the risks and rewards.

It would, of course, be nice if everyone in the world was middle class and had access to top notch health care. But they don't. The real choice facing many potential participants is access to care or not. Seems like if you're a poor, rural person in India, Malawi, or Bolivia, the promise of free medical care might be quite attractive.

Of course participants should be fully informed. But this is naive paternalism run amok. Do the do-gooders at the NYT really think they know better than a potential participant the trade off that individual should make? Apparently they do.

Interesting Blog

Came across an interesting blog on offshoring/outsourcing issues. Check it out:

InsideOutsource Blog

Detroit News Op Ed: Work Visas Stop Offshoring of High-Skill Jobs

Published a commentary piece in the Detroit News this morning, which was written in response to a very misinformed piece by Froma Harrop that ran about two weeks ago.

Here is the original piece by Harrop: Don't Expedite Offshoring with More Work Visas

Here is my piece than ran today: Work Visas Stop Offshoring of High-Skill Jobs

My submission tackled Harrop more directly, but the editors took out the direct references.

This should lead to some amusing venting in the DetNews comments section. As of 9:30am this morning, only one not-to-bad comment. But globalization tends to bring out the crazies, often with elaborate policy proposals that ignore basic economics or incentives. Should be interesting.

Senator Schumer (D-NY) Agrees: It's Bad Policy to Restrict Access to Global Talent

Not sure whether to be happy or not about this.

Schumer isn't right on much--at least on economic issues. So it always worries me a bit when we agree on something. But even a stopped clock. . . He's right this time.

See link: Schumer Vows to Overurn Ban on TARP-Takers Hiring H-1B Workers.

Hewlett-Packard Takes Advantage of Outsourcing

A recent article in Chron.com highligted the fact the while HP's profits have slumped in the last quarter their sales rose slightly. The technology company was able to offset some of their losses by taking on service business that was outsourced by a few of their customers.