Outsourcing is no longer just about cheap labor. The number of foreign-educated students returning to their native countries is exploding, creating an offshore talent pool of highly trained workers that never existed before.
It's also no longer just about India and China. Globalization is catching on almost everywhere, creating competition even in the most highly skilled professions and raising the competitive stakes everywhere. The silver lining is that it's also opening new markets that seemed unlikely even five years ago.
Forbes caught up with Robert Kennedy, director of the Global Initiative at the University of Michigan's Ross School of Business.
Forbes: What's driving outsourcing on a macro level?
Robert Kennedy: There are five key drivers. One is a tremendous liberalization on the policy side. In the mid- to late-1980s, the global economy consisted of the U.S., Europe and Japan. Places like India and China were behind Central and Eastern Europe and parts of Africa. They weren't really engaged in the global economy. That's completely changed. Roughly 3 billion people have entered the global economy. They want to buy things, and in order to do that, they have to sell something back to us. They can sell us manufactured goods, and they have a small advantage there. But in services, they have a huge advantage. If you move an automobile manufacturing plant from Michigan to Mexico, you may save 20%. If you move a call center offshore, once you've set it up on a run-rate basis, you'll save 50% to 60%. The advantage in services is that labor costs are a bigger overall percentage.
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04/03/2009 7:00PM ET
No, China is pretty far behind India and even places like the Philippines and Eastern Europe. It's largely due to a language problem. There are real challenges. Services exports from China will grow, but they won't overtake India anytime soon.
Source: http://www.forbes.com/2009/01/30/outsourcing-globalization-workers-technology-cio-network_0202_outsourcing.html
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