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The Backlash

The only thing that will make the furor over offshoring worse is hiding from it.

After all, in an era of multinational corporations, what exactly is offshoring? Take GE, for example. About 45 percent of GE’s employees are located outside the United States. The company has added 100,000 jobs in the past 10 years, much of them through acquisitions of foreign companies. During that period, GE’s employment levels in the United States have remained static at 160,000. That could lend credence to the argument that offshoring is a main cause of the jobless recovery. However, GE spokesperson Peter Stack argues that compensation and benefits for the company’s U.S. industrial jobs have climbed by 4.5 percent a year during that period. The company’s offshore work is done mostly through “captive” GE employees located overseas. Is it still considered offshoring if the foreign workers are full employees of the company and no net jobs were lost back home?

The question gets more complicated when one considers the plight of foreign-based CFOs of American firms. When Len Rinaldi, CFO of the UK-based EMEA division of Lucent Technologies (which is based in Murray Hill, New Jersey), moved jobs from one EU country to another as part of an offshoring contract with cash-collection company Equitant, he encountered the same push-back that U.S.-based CFOs are feeling. “The European works councils are very strong here,” says Rinaldi. “You have to justify yourself significantly to move jobs around the European Union. They’re still extremely nationalistic.” Still, he doesn’t consider the job moves to be offshoring, since all stayed in the EU.

Rinaldi faced a greater outcry when he moved R&D jobs from the EU to India as part of another offshoring contract. This phenomenon — in which offshoring to emerging overseas economies incites more of a backlash than “near-shoring” to an economically, ethnically, and culturally similar country — is one reason that many large offshoring companies like India-based Wipro and Infosys are setting up “near-shore” facilities in Canada and the United Kingdom. Many are even repositioning their service offerings so that they can give companies the option of keeping some of the outsourced positions within the United States instead of offshoring everything right away.

“You can see the relief on the CFO’s face when you tell him he doesn’t have to offshore to get the savings,” says Craig Tobin, senior vice president of sales for Dublin- and Stamford, Connecticut-based Equitant. “We tell them they can keep the jobs here now, improve their processes, and when they’re ready, they can offshore.”

Tobin also points out that many CFOs are considering outsourcing to large U.S.-based companies, like IBM Global Services, so “they can say, ‘We’ve gone to IBM, so we’re not making the decision to offshore those jobs.’” That way, any future decision to offshore will be the outsourcer’s decision, not the CFO’s.

CFOs at companies that offshore say that while they’re not doing any less than they did before the backlash, they are trying to be more “sensitive” about how they handle the offshoring process. IBM Global Services, for example, which was lambasted in the press for asking laid-off employees to train their offshore replacements, has ended that practice, and, according to IBM spokesperson Clint Roswell, “We’ve redoubled our retraining efforts for people whose skills are no longer in demand from our customers.”


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