Offshoring to find talent rather than cutting costs

The rationale for offshoring is shifting from cost-cutting exercise to search for talent, a new study by Duke University and Booz Allen Hamilton reveals.

by Booz Allen Hamilton; Duke University Fuqua School of Business
Last Updated: 23 Jul 2013

Unable to find highly skilled workers in short supply in the US and Europe, companies are turning to emerging markets for their needs.

Nearly three-quarters of companies expanding offshore said they were doing so to "access qualified personnel", a proportion which has increased by 70% over the last two years.

"Companies offshore because they can't get it at home," says Arie Lewin, professor at Duke's Fuqua School of Business and author of the report. "They are reacting to the steady decline in the supply of graduates with advanced degrees inengineering and science. Last year, it was estimated that US companies were in need of more than 50,000 master and PhD graduates."

But this is not without difficulty. Companies worry that the scattering of their pool of talent is straining management capacity and might affect their operating efficiency. Nearly half of companies report being concerned about "loss of managerial control", a 30% increase on 2005.

Political backlash at home or political instability in the offshore destination, the traditional concerns, are now off the list of worries. "Many companies are struggling as they redesign their organisations and implement processes to support the rapid rise of offshoring," says Vinay Couto, VP at Booz Allen Hamilton. "The obstacle to offshoring is more often inside a company than outside it."

As for destinations, India remains the preferred destination overall, particularly for the US. In Europe however, Eastern Europe comes first.

Source: Study finds companies moving high-end functions offshore to access talent
Booz Allen Hamilton and Duke University Fuqua School of Business
http://www.boozallen.com/capabilities/Industries/industries_article/16945601?lpid=660624

Review by Emilie Filou

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