Offshoring Clouds Job Picture

Large companies in North America and Europe are now losing over 250,000 jobs each year in IT, finance, and other key business services areas.

According to a new research update from The Hackett Group, Inc. this is due to the combined impact of offshoring, technology-driven productivity improvements, and the low-growth business environment.

While the number of jobs being lost annually will decline over the next few years, The Hackett Group now estimates that by 2017 nearly half of all back office jobs at these companies that existed in North America and Europe in 2002 will have disappeared – a total loss of 3.7 million jobs.

But even this assessment could be optimistic, as it factors in job creation due to economic growth. The IMF and others are now looking at shrinking short-term global growth projections, and more than half of the European Union countries have returned to recession in early 2013. So even the modest job creation assumptions in the Hackett model may prove to be overly optimistic.

While the total labor demand continues to shrink, The Hackett Group’s research also sees the “war for talent” entering a new phase, driven in part by the further globalization of business. The need for transactional staff is decreasing dramatically, while the demand for knowledge-centric staff is increasing. The Hackett Group finds a critical talent shortage, most clearly for knowledge-centric staff with the skills to help enable global business operations.

“For many people in North America and Europe seeking jobs in corporate finance, IT, or other business services areas, our research offers a bleak picture to be sure,” said The Hackett Group President of Advisory and Research Sean Kracklauer. “The evolving offshore job market and the maturing of Global Business Services operations has simply eliminated many of the jobs that used to exist in IT, finance, and other business services areas. But at the same time, new opportunities are presenting themselves. Staff that can develop the knowledge-centric skills that companies need to support their companies’ shift to Global Business Services, and overall globalization goals, will find themselves in great demand.”

The Hackett Group’s research estimated that 265,000 business services jobs will disappear in North America and Europe in 2013, in the tail end of a spike in job losses which began with the recession in 2008. In 2009 alone nearly 750,000 jobs were lost, and an average of 365,000 jobs have been lost each year since 2008. In 2014 and moving forward, The Hackett Group estimates that job losses will continue, but will shrink each year, declining to 133,000 jobs lost in 2017.

Of the baseline of about 8 million business services jobs that existed in North America and Europe in 2002, The Hackett Group’s research estimates that 46 percent, or 3.7 million jobs, will have disappeared by 2017, including 1.4 million jobs in corporate finance and 1.5 million jobs in corporate IT. All these estimates incorporate jobs lost due to offshoring and productivity improvements (which have remained stable at about 3 percent each year), offset by jobs created due to economic growth.

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