The Hackett Group - Research Alert: The Hackett Group Estimates that by 2017, 3.7 Million Back Office Jobs Will Disappear from North America and Europe Due to Offshoring and Technology
MIAMI & LONDON--(BUSINESS WIRE)-- Large companies in North America and Europe are now losing over 250,000 jobs each year in IT, finance, and other key business services areas, due to the combined impact of offshoring, technology-driven productivity improvements, and the low-growth business environment, according to a new research update from The Hackett Group, Inc. (NAS: HCKT) . While the number of jobs being lost annually will decline over the next few years, The Hackett Group now estimates that by 2017 nearly half of all back office jobs at these companies that existed in North America and Europe in 2002 will have disappeared -- a total loss of 3.7 million jobs.
But even this assessment could be optimistic, as it factors in job creation due to economic growth. The IMF and others are now looking at shrinking short-term global growth projections, and more than half of the European Union countries have returned to recession in early 2013. So even the modest job creation assumptions in the Hackett model may prove to be overly optimistic.
While the total labor demand continues to shrink, The Hackett Group's research also sees the "war for talent" entering a new phase, driven in part by the further globalization of business. The need for transactional staff is decreasing dramatically, while the demand for knowledge-centric staff is increasing. The Hackett Group finds a critical talent shortage, most clearly for knowledge-centric staff with the skills to help enable global business operations.
"For many people in North America and Europe seeking jobs in corporate finance, IT, or other business services areas, our research offers a bleak picture to be sure," said The Hackett Group President of Advisory and Research Sean Kracklauer. "The evolving offshore job market and the maturing of Global Business Services operations has simply eliminated many of the jobs that used to exist in IT, finance, and other business services areas. But at the same time, new opportunities are presenting themselves. Staff that can develop the knowledge-centric skills that companies need to support their companies' shift to Global Business Services, and overall globalization goals, will find themselves in great demand."
The Hackett Group's research estimated that 265,000 business services jobs will disappear in North America and Europe in 2013, in the tail end of a spike in job losses which began with the recession in 2008. In 2009 alone nearly 750,000 jobs were lost, and an average of 365,000 jobs have been lost each year since 2008. In 2014 and moving forward, The Hackett Group estimates that job losses will continue, but will shrink each year, declining to 133,000 jobs lost in 2017.
Of the baseline of about 8 million business services jobs that existed in North America and Europe in 2002, The Hackett Group's research estimates that 46 percent, or 3.7 million jobs, will have disappeared by 2017, including 1.4 million jobs in corporate finance and 1.5 million jobs in corporate IT. All these estimates incorporate jobs lost due to offshoring and productivity improvements (which have remained stable at about 3 percent each year), offset by jobs created due to economic growth.
Even these job loss estimates could be conservative, The Hackett Group's research explained, given that economic uncertainty remains exceptionally high. European Union (EU) statistics published this past May indicated that nine out of the thirteen EU countries using the euro returned to recession in Q1 of 2013. The International Monetary Fund has also repeatedly made downward adjustments to its short-term growth projections, which have dropped by more than a third over the past two years. In addition, the main engine of growth has clearly shifted from developed markets to emerging markets in Brazil, Russia, India, China, and elsewhere. While corporate profitability is at historically high levels, companies are focused on reducing fixed costs, further impacting on job creation.
The Hackett Group's research details how a major factor in the offshoring of business services and the overall job losses is the expanded use of Global Business Services (GBS) organizations, an evolution of the shared services approach. Unlike most shared services operations, which focus on a single function, GBS organizations strive to support an array of business services, including finance, IT, procurement, and human resources, in an integrated fashion. As GBS organizations expand and mature, many companies have found they can dependably be used to drive both cost and productivity improvements year after year. Typical companies see an average of 20 percent cost savings in their first year of GBS operations, and 6 percent savings annually thereafter. They also see 7 percent improvements in quality and customer service, as well as a 9 percent improvement in productivity.
According to The Hackett Group, the employment numbers are also tied to a fundamental shift in the nature of business services work and skills. Over the past decade there has been a dramatic reduction in the need for transaction-oriented jobs in these areas, and a commensurate increase in demand for knowledge-centric positions. The Hackett Group sees a significant talent shortage emerging in specific classes of knowledge-centric roles, including those that: support the strategic transformation and globalization of business services; enable global business operations; and support the transition from a transactional business services model to one focusing more on partnership.
In finance, The Hackett Group's research finds that by 2017, half of all jobs will be knowledge-centric, an increase of over 40 percent since 2003. In procurement, the trend is even more pronounced, with over three quarters of all jobs classified as knowledge-centric by 2017, an increase of over 46 percent since 2003. The Hackett Group's research finds that acquiring, developing, and retaining talent in these areas will be a major challenge for many companies over the next few years.
The Hackett Group's complete research insight, "The End of Offshoring As We Know It and The Beginning of Global Operations," is available as a complimentary download, following registration, at: http://www.thehackettgroup.com/research/2013/offshoring-pr/
About The Hackett Group
The Hackett Group (NAS: HCKT) , a global strategic business advisory and operations improvement consulting firm, is a leader in best practice advisory, business benchmarking, and transformation consulting services including strategy and operations, working capital management, and globalization advice.
Utilizing best practices and implementation insights from more than 8,400 benchmarking studies, executives use The Hackett Group's empirically-based approach to quickly define and implement initiatives that enable world-class performance. Through its REL group, The Hackett Group offers working capital solutions focused on delivering significant cash flow improvements. Through its Archstone Consulting group, The Hackett Group offers Strategy & Operations consulting services in the Consumer and Industrial Products, Pharmaceutical, Manufacturing, and Financial Services industry sectors. Through its Hackett Technology Solutions group, The Hackett Group offers business application consulting services that help maximize returns on IT investments. The Hackett Group has completed benchmark studies with over 3,500 major corporations and government agencies, including 97% of the Dow Jones Industrials, 84% of the Fortune 100, 87% of the DAX 30 and 48% of the FTSE 100.
More information on The Hackett Group is available: by phone at (770) 225-7300; by e-mail at email@example.com.
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The Hackett Group
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