We read with interest David Smith's  February article on ‘Job takeaway is good for you', describing the varied views over 'outsourcing' and 'offshoring' jobs to lower cost economies.

Undoubtedly, offshoring of core business areas is already a reality and will continue to grow in the coming years. In our view this development follows a basic economic law: countries with high living standards and wages must pay for this luxury with high productivity. However, the lifecycle over which these low-cost moves bear fruit is shortening. It does little to drive business growth and reduces competitive differentiation. Consequently European businesses must break out of their current mindsets of pure cost reduction but must also focus on generating revenue via high value-added services.

In banking, the substitution of low-value added jobs in administration or processing in the back-office by high-value added services around the customer in the front office has already begun and is irreversible; in our view the vast majority of all back office activities in banking will be carried out from low-cost offshore locations by 2010. However, there is a natural restriction for sensible business offshoring; activities requiring a high degree of language skills and professional qualifications will need to remain at home.

Offshoring also poses a great opportunity for businesses and people in highly developed countries. In focussing on their 'core competencies' countries must follow the imperatives of high qualification, high skill level and customer orientation rigorously and must translate this into the younger generation's education, whilst businesses on their part must collect and integrate their experience and knowledge from across the organisation in order to create those high-skill jobs.

Successful delivery of these aggressive strategies, which are not without significant risk, can be secured by adopting solutions which break the functional mindset to move companies into new and less cost-dependent market positions, which are much harder to imitate. Achieving this goal will involve three fundamental changes: anticipating your customers’ needs to identify sustainable new value-creating opportunities; determining how the new propositions affect your organisation; and creating and delivering an integrated business to enact the strategy.

If anything offshoring should make everybody aware of the need for continuous learning and great execution to take advantage of the business opportunities that lie therein.

Yours faithfully

Max Sembach and Simon Miller
PA Consulting Group