Future of Outsourcing and Offshoring - is it all over? Impact of inflation in China and India. EU and America job losses future trends. Banks, manufacturing, software development. Conference keynote speaker

Summary

The speaker at a Swedish conference discusses the challenges of offshoring, particularly wage inflation in countries like China and India, which affects multinational companies across the EU. Executive positions in cities like Shanghai and Beijing experience up to 100% wage inflation, while middle management in call centers face 14-20% increases. This trend is prompting companies to reconsider offshoring, with some jobs returning to Western countries and others moving to more cost-effective locations like Pakistan and Vietnam. The economics of offshoring are shifting, and companies must adapt to a changing global job market.

Takeaways

• 🌐 Outsourcing and offshoring are becoming more complex due to global wage inflation, particularly affecting executive positions in cities like Shanghai and Beijing.
• 📈 Wage inflation rates in India and China are high, with some areas experiencing up to 100% increase for top executives and 40-60% for middle managers.
• 🔍 There's a shortage of experienced managers in offshoring hubs, leading to increased wage demands and challenging the cost-effectiveness of offshoring.
• 🌍 The global job market is forcing companies to pay global rates or higher for top talent, especially those with cross-cultural business experience.
• 🏭 The economic benefits of offshoring to countries like India are diminishing as wage levels rise, making it less cost-effective.
• 🔄 Companies are considering moving operations from India to more cost-effective locations like Pakistan, Vietnam, or Bangladesh due to wage inflation.
• ⏳ The offshoring industry is at a turning point, with the economic model shifting and potentially leading to a slowdown in its growth.
• 🔙 Jobs that were offshored to India are starting to return to Western countries like the EU, US, Canada, and Australia due to economic unfeasibility.
• ❓ Companies that were late to offshore may miss out on early cost advantages and are now questioning the value of offshoring.
• 🔮 The future of offshoring will likely involve a more strategic approach, with companies carefully considering the economic and managerial implications of their decisions.

Q & A

What is the main challenge discussed in the conference regarding multinational companies?

The main challenge discussed is offshoring, which involves moving jobs outside of a company's home country to locations like India or China, and the associated issue of wage inflation.

How does wage inflation affect companies in the European Union?

Wage inflation, which can reach up to 100% for executive posts in cities like Shanghai and Beijing, and 40-60% in Mumbai and Hyderabad, is significantly affecting companies across the European Union.

What is causing the shortage of experienced managers in offshoring locations?

An acute shortage of experienced managers is being caused by high wage inflation at lower levels, with rates of 14-20% for middle managers handling operations like call centers.

How does the speaker suggest companies should adapt to the global job market?

Companies should recognize that top management in offshoring countries are part of the global job market and be prepared to pay global rates or higher for specialized skills and cultural understanding.

Why are some companies considering moving out of India for offshoring?

Companies are contemplating moving out of India due to increasing costs that make offshoring less economical, as wage levels rise and the cost advantages diminish.

What alternative locations are mentioned for offshoring by the speaker?

The speaker mentions Pakistan, Vietnam, Bangladesh, and other places as potential alternatives to India for offshoring due to more favorable economic conditions.

How does the speaker describe the future of the offshoring industry in India and China?

The speaker suggests that while the offshoring industry will continue to exist in India and China, the economic dynamics are changing, and the industry may not grow as rapidly as before.

What economic factors make offshoring to a place like India worthwhile?

Offshoring to a place like India is worthwhile as long as wage differentials are significant enough to offset the additional management costs required for efficient and secure offshoring operations.

What is the speaker's prediction regarding jobs that were offshored to India?

The speaker predicts that we will see more jobs that were offshored to India coming back to the European Union, the United States, Canada, and Australia due to economic unviability.

What dilemma do companies face who were slow to offshore?

Companies that were slow to offshore face the dilemma of whether it is still worthwhile to do so, as they missed the early cost advantages and now must consider the changing economic landscape.