Sir
The US Senate, in trying to legislate against outsourcing, risks becoming embroiled in a fight against an offshoring tide it cannot hope to control. Your article on offshoring in India ('The logic is inescapable', January 28) also echoes the US mistake of confusing 'outsourcing' with 'offshoring'.
The protectionist laws in the US intend to protect jobs from the perceived outsourcing threat. Ironically, the real threat is from the globalisation of business that the US has led. Of course, multinationals take advantage of international labour markets when deciding where to locate production and back-office functions. Increasingly, countries such as India have a key role to play.
But the story is not limited to outsourcing. Offshoring is the real issue. And outsourcing and offshoring are not the same. In a global labour market, manufacturers such as Ford have been 'offshoring' for years. They select the most effective locations around the world for their manufacturing facilities. They outsource some, but by no means all, of their manufacturing supply.
Part of the equation involves taking advantage of local labour markets. However, such companies still retain many of their core production competencies in-house.
For some years the trend has been to outsource or offshore back-office functions such as human resources and finance. This is, in effect, simply playing catch-up with the global manufacturers. The number of outsourcing providers in countries such as India has increased as a result.
But now there is a new influence. The banks have shown us the opportunity. Their strategy has been to improve their core transaction processes using offshore centres. For them, it is of course less easy to find an outsource provider. And why would they try?
Surely they would want to keep in-house the competitive advantages they gain from offshoring their core processes. For example, for Standard Chartered, operating in a global market and with customers across the world, there is no realistic constraint to where it chooses to locate its processing. It makes the most sense for the group to use the best-value facilities it can find anywhere on the planet.
In a truly global economy, and with a seemingly limitless pool of educated employees in Asia, the offshoring trend is set to continue regardless of the US protectionist legislation on outsourcing.
