Businesses in Europe and the US will transfer about 750,000 jobs, including IT, to lower-cost locations over the next four years, taking the total number of jobs offshored to 2.3 million by 2016.
But offshoring could stop in the next decade when there are no more roles to go, according to research from The Hackett Group, which looked at 4,700 businesses with annual revenue of more than $1bn.
The research revealed that jobs in IT, finance, human resources and procurement will continue to move to locations such as India, where 40% of the jobs will go. A third of all jobs in these areas will be offshored by 2016.
But The Hackett Group expects the amount of jobs offshored each year – currently around 150,000 – to level off or decline after 2014, as only 1.8 million out of a total of 5.1 million business services jobs are appropriate to offshore.
“So by the end of the next 8-10 years, the traditional model of lifting and shifting work out of Western economies into low-cost geographies will cease to be a major factor driving business services job losses in the US and Europe,” said the research.
Job losses to continue as automation increases
Michel Janssen, chief research officer at The Hackett Group, said: "In the US and Europe, offshoring of business services and the rapid transformation of shared services into global business services, have had a significant negative impact on the jobs outlook for nearly a decade.”
"That trend is going to continue to hit us hard in the short-term. But after the offshoring spike driven by the recession in 2009, the well is clearly beginning to dry up. A decade from now the landscape will have fundamentally changed, and the flow of business services jobs to India and other low-cost countries will have ceased," he said.
Many organisations don’t know how much improvement opportunity they’re missing
Janssen said as offshoring opportunities dry up, businesses will increasingly look at other means of reducing costs. "Other opportunities for improving efficiency still exist, particularly automation and end-to-end process improvements to streamline how business services are provided," he said.
As a result, job losses will continue as technology to enable business process automation takes off. Automation will have reduced the number of business process job in the US and Europe by 2.2 million in the decade from 2006, with about 200,000 jobs a year being automated.
According to Forrester, many processes that can be automated are being overlooked due to the tendency for businesses to look at bigger processes. “Many organisations simply don’t know how much improvement opportunity they’re missing. Traditionally, firms have focused on the big rocks in the garden while ignoring all the weeds that choke growth,” it said in a report.
Mobile operator O2 has deployed software to automate business processes, which will reduce the cost of back office operations and cut its reliance on offshore recruitment to cope with spikes in workload.
The software, from a company called Blue Prism, also enables the telco to make changes to business processes, thus freeing up the IT department to focus on major IT projects. O2 expects to save millions of pounds and get a return on investment in the first year.