Although 11 percent of the world's 1.46 billion service jobs can be theoretically performed remotely, the number of those jobs offshored by 2008 will remain modest. An estimated 1.1 percent of total demand for labor in services will go offshore due mainly to internal company barriers.
The background for the report examines the current debate on offshoring and the context for MGI’s latest research effort, defines terms used in the report, explains the report's scope, and introduces the questions covered by the research.
Synthesis of Findings — Demand for Offshore Talent and Sector Cases
The number of service jobs offshored will remain modest compared to total employment in service activities in developed economies over the medium term. The gap between the current degree and the potential level is largely explained by internal barriers, most notably operational issues, management attitude to offshoring, and structural issues. External regulatory barriers play a small role overall. The potential for global resourcing varies depending on the industry.
The Demand for Offshore Talent in Automotive Services
The degree of adoption of offshoring in the services portion of the auto sector is low, with approximately 0.06 percent of developed world employment in the sector currently performed in low-wage countries. Although the potential for global resourcing in the sector is 11 percent, only 0.2 percent of developed world employment is projected to be performed in low-wage countries by 2008.
Overall, about 20,000 jobs in the health care sector will go offshore in 2008, representing 0.07 percent of developed world health care employment. The potential demand for remote labor in the sector, although low in percentage terms (8 percent), is still over 5 million jobs because of the large number of people employed in the sector.
Global resourcing in the insurance sector is still in its early stages. In contrast to a maximum current potential of 2.3 million jobs (19 percent of industry employment in 2008) that could be performed remotely, more than 20,000 jobs are performed offshore in low-wage countries. Offshoring will grow at 14 percent annually if the current trend continues, reaching 38,000 employees in 2008 (equal to 0.6 percent of industry employment in high-wage countries).
MGI projects total employment in the sector will reach 6.9 million in 2008, and 770,000 jobs (13 percent of sector employment in developed countries) will be performed offshore in low-wage countries, compared to 371,000 in 2003. In contrast, a maximum of 44 percent of all jobs in the sector could be potentially performed remotely, equivalent to 3 million employees.
The Demand for Offshore Talent in Packaged Software
The software sector will continue to see growth in offshoring, with an estimated 116,000 jobs (18 percent of sector employment in developed countries) projected to be performed by employees in low-wage countries by 2008, compared to 44,000 in 2003. Nearly half (49 percent) of the estimated 690,000 packaged software jobs in 2008 could be potentially performed remotely, the highest of the sectors MGI studied.
More than 10,000 employees in the pharma sector are globally resourced from low-wage locations today. This is expected to double to 21,000 employees in 2008 in response to declining profit margins and rising cost pressure in the sector. The potential for globally resourced labor in the sector is as high as 13 percent, indicating that 238,000 jobs could be performed remotely in 2008.
The pace of adoption of offshoring in the large retail sector is projected to be slow relative to other industries, representing just 0.1 percent of retail employment in high-wage countries by 2008. Of the projected 156 million jobs in the retail sector in 2008, however, 3.2 percent of total sector employment in developed countries could be performed remotely, equivalent to 4.9 million employees.
Retail banking was one of the earliest sectors to adopt the global resourcing of services, and offshoring is projected to reach 2.4 percent of total sector employment in developed countries by 2008. The theoretical maximum for globally resourced labor in retail banking is 25 percent, translating into approximately 3.1 million jobs in 2008.
