For many years, offshore outsourcing has been claimed as one of the primary drivers for globalisation. What started merely with overseas call centres, offshoring now extends to programming, troubleshooting, systems maintenance, and an assortment of supporting business functions such as accounting and data entry.
Many companies, particularly from 1st world countries, send thousands of jobs to offshore outsourcing destinations with emerging economies such as Philippines, India, China, and Eastern Europe, and the media is quick to report these massive migrations to overseas locales.
However, for the sceptics of offshore outsourcing, this strategy is nothing but a cost-cutting exercise which has led to an increase in unemployment over the past decades.
Whether offshore has an adverse impact on the local economy has been a central issue for many countries such as the United States, Australia, and United Kingdom. In 2017, U.S. President Donald Trump said he had prepared an “economic-development” measure that would castigate companies that outsource their jobs to other countries. It has also been dubbed as “threat to jobs and livelihoods” in one of the articles of ABC.
There is No Proof
While these arguments are mostly what one would expect from conservative economists, let us not forget that no proof actually exists which directly links offshore outsourcing to unemployment. In fact, a recent study by Warwick Business School’s Nigel Driffield, University of Wollongong’s Vijay Pereira and Aston University’s Yama Temouri has recorded no evidence that offshoring results in unemployment.
The study, which specifically investigated the effects of offshore outsourcing by 5,746 multi-national firms across Europe over an almost 20-year period (1997-2016), primarily engaged the service sector which makes up about 80% of the UK employment. The type of businesses ranges from retailers to financial services and telecommunications that offshore to 9,416 partners in 87 countries. Majority of the parent firms are located in Germany, Spain, France and Sweden, followed by Belgium, Denmark, Finland and the United Kingdom.
Surprisingly, aside from the lack of proof that offshoring led to job loss, the study has also found out that offshore outsourcing has resulted in increased in employment for local companies examined since the global financial crisis in 2007-08.
Those claims by critics have made an all-encompassing implication that permeates beyond the business sector. One of the proponents of the study, Nigel Driffield noted the unproven allegations of loss of employment because of offshoring have played a role in the UK voting for Brexit as well as the rise of right-wing protectionist governments in some countries. He said it is imperative to have proper evidence on the issue.
More Than Just a Cost-Cutting Strategy
To say that offshore outsourcing is a mere cost-cutting effort used by those companies to create more profit is discriminating and impartial as well. In fact, more and more companies are broadening their approach to outsourcing, according to a recent survey by Deloitte. Nowadays, businesses partnering with offshore outsourcing providers can foster innovation within their organisation and achieve operational efficiency that enables the company to retain or even increase their in-house workforce.
Overall, offshore outsourcing is a strategy that enables business growth and helps companies to invest more in their offshore and onshore talents.
By partnering with Global Outsourcing, you will be able to reinvest the savings to grow other divisions of your business. In fact, the significant productivity gains and increased sales as a result of offshoring can help you create more local jobs which completely offsets the jobs lost from the original offshoring.
Contact us today to learn more about our offshore outsourcing services.