Much of the talk about offshoring is about India and China. With good reason too. India and China both have over 1B people each, and if you think about the “law of large numbers” even a small increase in skills translates into a huge competitive advantage against other industrialized nations. The real story however, is twofold. First, the offshoring of future industrial capacity can easily overtake anything the Americas and Western Europe can dish out over just about any time projection. Second, offshoring of services really only effects the English speaking countries.
Let’s not spend time on the first point. It’s rather obvious that China and India are developing quickly, and I don’t think anyone is arguing the evidence. The real argument is about current and future capacity compared to other industrialized nations. While China and India have a long way to go, even if they each only bring 25% of their populations to a “middle class” level of income and capability, we’re talking about a 500M workforce. Comparatively the U.S. has under 175M active workers. So a small percentage gain in productive workers in China and India create huge impacts on the global economy.
Point number 2. If we look at the jobs we’re most fearful of losing, it’s the service industry jobs. Let’s face the facts, industrial and manufacturing jobs are easily outsourced and offshored. These jobs are not highly valuable because they can be programmed into a machine or given to someone in another country for 5% the labor cost. The jobs we’re worried about losing are the service industry jobs which are heavily being displaced to India.
The fact is that India has the greatest chance of becoming the next world economic power because they already speak English. We do fear manufacturing going to China, but hey – that’s just manufacturing. But when we talk about India’s capabilities to take over our call centers, IT programming, and other white collar type jobs, this is serious business because these are high paying jobs that require a high degree of thought and quality.
Is Japan or Spain worried about their IT help desks getting offshored to India? Not nearly as much because there is no natural capacity in India for that work in those languages. Even if there was a population that could be easily trained to transact business in those languages, the reprogramming of software to accommodate language differences would be a nightmare. So the cost of offshoring functions to India or China is simply not as good as it is for English speaking countries.
So yes – offshoring certainly is a global phenomenon that effects all countries. But the high value jobs are most at risk in English speaking countries, and India with it’s natural capabilities to transact business in English is in a great position to capitalize not just in the industrial, but also the service industries.