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US services to lose 3.3 mn jobs to India, China

K Giriprakash in Bangalore

Over the next 15 years, 3.3 million US services industry jobs and $136 billion in wages will move offshore to countries such as India and China, a leading research firm, Forrester Research, said.

Forrester research group director John McCarthy said the numbers will easily double when the rest of G7 countries such as Japan, UK, and Germany are included.

He said a growing base of companies are shifting a range of IT, back office, customer service and sales operations' offshore to cut their costs by up to 50 per cent.

McCarthy said because of the huge amount of services' trade, India will become the US' primary trading partner in South Asia.

This will raise India's profile in comparison with traditional US allies such as Pakistan.

Forrester Research identifies and analyses emerging trends in technology and their impact on business.

McCarthy said a key input into financial performance and shareholder return will be a company's ability to project manage remote services providers.

Lack of project management expertise already hinders businesses' ability to take advantage of lower-cost IT solutions from firms in India and Russia.

IT executives, who successfully manage the offshoring of their technology operations, will make the case that they can tackle outsourcing of other corporate operations.

By the end of the decade, executive stature will be measured by the size of the outsourcing contracts that they manage, not the number of employees.

McCarthy said over 10 to 20 years, there will be a tiers in the services' industry similar to the manufacturing sector.

"Simple, base-level back-office payroll and data entry will go to rock-bottom-wage countries such as Vietnam and Uruguay over time and countries such as India will move up the chain and take on more complex software and product development services," he said.

As a result, firms will have to take a portfolio approach and not rely on a singe vendor or country to receive the maximum cost savings.

As call and processing centres shift from rural America to Africa, South America, and Asia, governments will jockey for IMF money to boost their telecom and services-enabled infrastructure. Telecom deregulation will become a key economic development debate.

Without a cheap pipe, firms will not tap into the low cost labour pool. And with the services jobs will come further investment from the likes of Wal-Mart to tap into the emerging middle class.

He said multinationals will push for consistent intellectual property protections, clear property rights, tariff reductions on services, and supportive liability laws in order to maintain control of their dispersed services network.

McCarthy said the economies will increasingly favour the use of overseas services' staff because of cheaper labour rates, low cost bandwidth, standardised business application and net-based collaborative tools such as instant messaging.

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