Reprint: R0406G
Of late, offshoring and outsourcing have become political hot buttons. These o words have been conflated to mean that high-paying, white-collar jobs have been handed to well-trained but less expensive workers in India and other locales. The brouhaha over the loss of service jobs, which currently account for over 80% of private-sector employment in the United States, is not merely an American phenomenon. The fact is that service-sector jobs in all developed countries are at risk.
Regardless of what the politicians now say, worry focused on offshoring and outsourcing misses the point, the author argues. We are in the middle of a fundamental change, which is that services are being industrialized. Three factors in particular are combining with outsourcing and offshoring to drive that transformation: The first is increasing global competition, where just as with manufactured goods in the recent past, foreign companies are offering more services in the United States, taking market share from U.S. companies. The second is automation: New hardware and software systems that take care of back-room and front-office tasks such as counter operations, security, billing, and order taking are allowing firms to dispense with clerical, accounting, and other staff positions. The third is self-service. Why use a travel agent when you can book your own flight, hotel, and rental car online?
As these forces combine to sweep across the service sector, executives of all stripes must start thinking about arming and defending themselves, just as their manufacturing cousins did a generation ago. This will demand proactive and far-reaching changes, including focusing specifically on customer preference, quality, and technological interfaces; rewiring strategy to find new value from existing and unfamiliar sources; de-integrating and radically reassembling operational processes; and restructuring the organization to accommodate new kinds of work and skills.
