Posted on: Monday, July 5, 2004

U.S. firms urged to outsource jobs faster

By Paul Blustein
Washington Post

A report by an influential consulting firm is exhorting U.S. companies to speed up "offshoring" operations to China and India, including high-powered functions such as research and development.

The report by the Boston Consulting Group warns American firms that they risk extinction if they hesitate to shift facilities to countries with low costs. That is partly because the potential savings are so vast, but the report also cites a view among U.S. executives that the quality of American workers is deteriorating.

"The largest competitive advantage will lie with those companies that move soonest," the report states. "Companies that wait will be caught in a vicious cycle of uncompetitive costs, lost business, underutilized capacity and the irreversible destruction of value."

Boston Consulting, which counts among its clients many of the biggest corporations in the United States, admonishes that they have been too reluctant, rather than too eager, to outsource production to "LCCs" — low-cost countries.

"Successful companies ask themselves, 'What must I keep at home?' rather than 'What can I shift to LCCs?' " the report states. "Their question is not 'Why outsource to LCCs?' but 'Why not?"'

The report's conclusions underline the intensifying pressures on companies to shift jobs overseas. Although many economists believe the trend will help the U.S. economy by improving productivity, and that job creation will more than compensate for jobs going overseas, the study suggests the movement of jobs abroad is likely, if anything, to accelerate in coming years.