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John Hagel on Offshoring

June 14th, 2004 · No Comments

John Hagel writes:

Theres a storm brewing over offshoring, but the irony is that neither side in the emerging debate fully understands the challenges and the opportunities ahead. One side the opponents focuses on the workers being displaced from their jobs as companies shift work to offshore locations and see nothing but challenge. The other side the companies that are actually shifting key areas of activity offshore focus on the near-term cost savings and see only benefit, if only they can keep a low enough profile to avoid adverse publicity. Both sides miss the key significance of the offshoring trend.

Offshoring is not just about cost reduction through wage rate arbitrage. Instead, it is a powerful way to improve performance by accessing distinctive resources and accelerating capability building. Bottom line: offshoring will force all of us to become more specialized and to make some difficult choices to exit certain activities along the way. In fact, by viewing offshoring too narrowly as simply a way to access cheap labor, companies risk unleashing a vicious cycle that will lead to value destruction.

He has written a draft paper on the topic.

Tags: Emerging Markets

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