Recent research indicates the number of jobs in IT, finance and other business services being offshored will keep rising over the next few years -- but not for much longer than that. This ongoing trend challenges HR executives to stay on top of a shifting, globally based workforce and identify opportunities overseas -- and at home.
HR has played a vital role in managing the transition to an increasingly global workforce for well over a decade. If recent research is any indication, that role isn't likely to diminish anytime soon.
A study conducted by the Hackett Group forecasts that corporations in the United States and Europe will move an additional 750,000 jobs in IT, finance and other business services to India and other low-cost geographies by 2016.
The research by the Miami-based business consulting firm -- which examined data on 4,700 U.S.- and European-based companies with annual revenue of more than $1 million -- predicts a total of 2.3 million jobs in finance, IT, procurement and HR will move offshore in that timespan. That represents about one-third of all jobs in these areas.
According to the study, India is by far the most popular destination, with nearly 40 percent of the offshored jobs heading there.
As always, the desire to cut costs is a key driver of increased offshoring, but there are other factors at work as well, says Michael Janssen, chief research officer at the Hackett Group.
"A second major rationale has developed over the past few years, and that's globalization," Janssen says. "Companies are making it a priority to move to true global operating models, with standardized processes across diverse geographies and business units.
"As they do this, it becomes dramatically easier to consolidate business processes and make significant improvements to the processes themselves, in terms of both efficiency and effectiveness," he says.
External factors -- such as the emergence of viable global HRBPO solutions, continued functional productivity and increased fiscal awareness -- are also contributing to this ongoing increase, says Michael Broomhead, director of the international consulting group at New York-headquartered Towers Watson.
"Certain business services are increasingly being seen as a commodity service, where, for many, home shared-service centers were just a very small stepping stone to automation and global systems," he says. "Companies continue to globalize, and with it comes the desire to think more globally in terms of service delivery."
The continuing flow of jobs overseas presents a unique challenge for HR leaders at U.S. companies, says Stan Lepeak, director of global research for Houston-based KPMG Shared Services and Outsourcing Advisory.
HR must "manage the shift in their workforce from a local to more globally based [model], and recognize that more HR services will need to be self-service," says Lepeak.
Training expectations for employees and managers outside the United States are another key consideration for HR, says Harry Osle, global HR practice leader with the Hackett Group.
"Staff in low-cost labor countries need traditional 'Management 101' training, while more experienced staff in the U.S. require radically different, higher-level training," says Osle. "So, training programs can't be standardized globally anymore. Different parts of the world need different focuses.
"The key," he says, "is to clearly understand the development gap by region, by business and by role, and train to those specific needs."
Looking ahead, the Hackett Group projects that levels of offshoring will start declining by 2014. With the flow of business-service jobs to other countries leveling off in the coming years, HR must start preparing now, says Osle.
"HR is still very much playing catch-up here," he says. "Most companies haven't figured out how to deal with the current environment, and need to pay particular attention to strategic workforce planning -- job-growth areas, skill-set needs, recruiting and staffing, training and development needs, rotation and turnover -- as a key process that is needed in support of business operations."
HR can also play a major role in creating cultural consistency, Osle says.
"Some companies are go-getters, and some are more conservative," he says. "In either case, this cultural DNA has to be communicated and transmitted on a global basis. For HR, it starts with understanding the human capital needs of the business."
In addition, Lepeak says, HR must determine how to establish and build the organization's global business-service-delivery models, not only for HR services, but for the organization as a whole.
"This includes attracting and retaining talent globally, understanding how to build and manage collaborative work teams globally, understanding different reward and motivation needs and systems on a global basis and developing global training programs; often overhauling career track and succession planning programs to make them more global," he says.
Ultimately, says Broomhead, HR "needs to understand that business landscapes have and will always continue to change."
"HR must be predictive and not just supportive when it comes to driving organizational performance," he says. "More than ever, the identification, development and management of organizational talent will be a differentiator, and the global stage presents HR with never-before-seen opportunities as well as risks."