Gerhard Rohde

1
Social and economicsustainability ofoffshoring

• Gerhard Rohde
• UNI-Europa
• EU-US Seminar 13-14 December 2004, Brussels
• Gerd.rohde_at_union-network.org

2

• Offshore outsourcing here to stay
• Offshore outsourcing still a fairly young
  business model
• Not enough experience among managers, employee
  representatives and trade unions
• Push factors
• consultants set the trend
• pressure from customers to lower prices through
  offshore components
• stock markets like an India story

3
Offshore highly controversial

• Opinions depend on perspective
• Macro- or micro-economic perspective
• Location (sending or receiving countries)
• Company or employee
• Offshoring has become a controversial political
  issue
• UK, France, USA American jobs for Americans
  unpatriotic investment
• Xenophobia, protectionism
• Downward pressure on salaries, social and working
  conditions
• cMarket in Boston US programmers at overseas
  salaries 45K instead of 90K
• Not enough neutral scientific research
• Most knowledge produced by consultants who, are
  part of the business

4
Offshore world map
Ireland
CEE
China
Israel
Russia
Philippines
8.3
8.2
7.7
India
Latin America
3.7
3.0
1.1
Israel
India
Ireland
Canada
China
RoW
Source BusinessWeek February 3, 2003
(Source McKinseyCompany 2004 Billion US)
5

• High failure rate
• in 2003 Gartner estimated 6bn wasted
• almost every second project failed
• Flop rate of 40-50 (clearview consulting)
• Main reasons
• poor management
• low balling leads to bad contracts
• saving potential vastly over estimated
• underestimation of communication/coordination
  needs
• short term approach instead of long term
  relations building
• mishandling of human resources
• misjudgement of intercultural differences
• Failed projects are worse from an employee
  perspective than successful ones

6
New skills needed

• Management
• Understanding of the offshore business models
• Mechanism and design of offshore projects
• Complex network management
• Intercultural, language, communication skills
• Social implications domestically and at offshore
  destinations

7
New skills needed

• IT Professionals
• Technical
• Business, organisation requirement analysis
• Technology neutral skill
• Project management
• Behavioural
• Communication
• Teamwork, intercultural, relationships
• Commercial awareness

8
New skills needed

• Employee representatives / trade unions
• Jobs prone to offshoring / pre-emptive
  re-skilling
• Anatomy of offshore project phases
• Evaluate feasibility of projects and risk
  analysis
• Transaction costs
• Information about target countries
• Cooperation with their international unions

9
Offshore principles

• involvement and participation of employees
• avoid compulsory redundancies
• protect career value, terms and conditions of
  employment
• reinvest savings in skill development,
• respect socio-political situation in target
  country
• respect of ILO labour standards and OECD
  guidelines
• freedom of association and the right to
  collective bargaining
• working conditions are safe and healthy, living
  wages are paid
• UNI offshore outsourcing charter
  (www.union-network.org/themes)

10
Inter-national
National ServiceCenter (NSC)
National
State
Andhra
Karnataka
Maharastra
Tamil Nadu
Delhi
Hyderabad
Bangalore
Mumbai
Chennai
Kerala
Local
Mysore
Vizak
Pune
Coimbatore
Hubli
Vijayawada
11

• In summary
• Offshore outsourcing is a complex process with
  political, social, cultural, ethical and economic
  implications
• Offshore outsourcing not a mechanical, it is a
  social process.
• A holistic view has to be incorporated in
  curricula for training of managers and
  consultants
• UNI Europa starts ESF project under budget
  heading Innovative approaches to the management
  of change with the title
• Making offshore outsourcing sustainable (MOOS)
• Focus is on how to better manage offshore
  projects.