Offshoring: and the winner is ... contrary to the recent spate of negative media coverage and political attacks against offshoring, a growing body of credible sources are speaking out about the upside for the U.S.--for both jobs and the economy.

• Author: Heffes, Ellen M.
• Position: Outsourcing

Testifying before the U.S. Congress last January, Hewlett-Packard CEO Carly Fiorina said, "There is no job that is America's God-given right anymore." Her frankness drew heavy criticism, but it was clear by that time that lines were drawn in the sand on globalization and offshoring.

For more that a decade, emotions, economics, media, politicians and public policies have created a flurry of controversy over U.S. jobs moving abroad. What is the real story behind the headlines? Who really benefits? Does one country benefit at the expense of another? Does one industry, company or individual benefit at the expense others? How serious a threat is globalization, global sourcing or offshoring--whatever "name" it is given--to U.S. jobs and the economy?

Globalization's reputation as the "enemy" is now the real threat to the U.S. economy, argues McKinsey Global Institute's April 2004 publication Exploding the Myths About Offshoring. Diana Farrell, director of McKinsey Global Institute, the economics think tank of the consulting firm McKinsey & Co., explains offshoring as part of a bigger process of global industry restructuring--or companies becoming global entities, so their customer base is no longer primarily "national with a little bit of export on the side."

As the percentage of these multinational operations increases, an increasingly diversified management group now serves customers around the world, along with a diversified investor group. The result, Farrell says, is that concentrating on the domicile of a company--how we think about a company--is not helpful anymore. "We need to break that mold of being primarily one country just because you happen to have your headquarters there."

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Indeed, Farrell argues, understanding that we are part of a global economy, from which there are real benefits to be derived, will help to move our models of fear to models of: how do we channel this to productive use and stave off the risks that are there? "This is clearly a global creation story--a win-win opportunity for good things to happen economically," she says.

Offshoring means "doing things off-site" to Dane Anderson, program director for outsourcing for Meta Group Inc. "There doesn't need to be a shore involved, or a beach or a body of water. The question to ask is, 'Can I offshore this?' You can do many tasks in the next county, the next city, next state or halfway across the globe."

He points to industries that have experienced offshoring such as printing and manufacturing: "It's an evolutionary acceptance of companies trying to figure out what their core competency is, and what they can be most efficient and effective in," says Anderson. He notes that Ford Motor Co., at one time, made steel, only to determine that that function wasn't core to its business. So it became outsourced, and, in some cases, offshored. Similarly, at one time, The New York Times owned forests.

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The current global economic evolution, Anderson says, is a continuation of the "better, faster, cheaper" mantra that started with the outset of the information technology (IT) services industry. "Organizations continue looking for more, but they also want more value-added. So, today's offshoring represents maintaining and continuously improving upon that effectiveness and efficiency for profitability." Organizations, he says, are going to a global delivery model. "We are seeing that in manufacturing, and it's sequeing into IT, where standardization, the commonality of delivery models, will be global; it'll be the same in India as it is in Dallas, as in China, with the differentiation the labor arbitrage."

Undeniably, IT has been the key driver of the late-20th, early-21st century offshoring phenomenon. In looking at just the past 10-15 years and the emergence of the Internet and networking capabilities, Anderson affirms, IT has definitely been an influencer, because it enables greater efficiency and effectiveness in a shorter timeframe, a competitive-advantage strategy. "The past 40 years of IT has brought forth all kinds of great change, and we [in the U.S.] need to stay in front...