Offshoring: Problem or opportunity in disguise?

In Andrew Kris' regular column for HRO Today, in January 2004, he examined the issues of offshore HR outsourcing with in Europe.

Offshoring: Problem or opportunity in disguise? Consider offshoring a stepping stone to greater opportunities, not a deadweight dragging you down.

Not a day goes by without the European press lamenting the loss of administrative jobs to "far-away" places. And that does not always mean India or the Philippines. Far-away can be quite close in terms of distance in Europe. Prague and Budapest are not more than 100 minutes by air from most of Western Europe, or 48 hours by T-72 tank, as we used to say not long ago. Central Europe is close culturally too, and, in any case, the European Union will soon welcome many of the countries that just a few years back we thought of as "foreign". So what's the fuss about?

There is a short-term opportunity for labor arbitrage in Central Europe, as well as in the less well-heeled areas of the South, but it is a short-term opportunity--a three- to five-year window at best. Barcelona, Lisbon, Prague, Krakow and Budapest will not take long to go the way of Dublin and Rotterdam, both overheated labor markets for HR and administrative service providers. There is not an endless supply of willing, well-educated, bright young things dashing to learn Western ways and ready to sacrifice all for higher paid jobs. The pond will be fished out soon enough.

Still, under today's ultra-competitive conditions what CEO, CFO, or far-sighted HR leader would not give everything for an extra 15 to 20 percent reduction in back-office costs that can be achieved by going offshore to Central Europe? Even for three or four years. I do wonder though whether the drive to offshore leaves us too focused on the short term.

For all the effort involved in taking work out of country, would we not be better served accelerating the simplification and IT-enabling of our HR processes? Because labor is cheaper for now, we are tempted to go on investing in legacy technologies, even better ways of managing paper through document management systems, automated scanning, and so on. Is this really smart?

Stop here. I know that offshoring is a good thing all round - it takes Western business processes to our closest neighbours in Central Europe and makes our companies more efficient. It also helps develop and improve local economic conditions. As a not-so-long ago Hungarian migrant to the West, I know this to be a powerful and welcome influence.

It is becoming difficult though to ignore that the export of jobs brings misery at home. Reports in the popular press and union protests are a testimony to the disquiet in the United Kingdom and increasingly on the continent. My colleagues at the SBPOA are receiving calls daily from HR outsourcing providers and shared-services operators asking for support in representing their case and lobbying in London and Brussels.

My HR friends lament that HR managers have grown comfortable with the years of familiar, endless, routine administration. They say that too many have forgotten what HR is really all about: people, not processes and administration! And now, when the routine has been offshored, we are expecting those same HR professionals to become expert HR advisors overnight.

Who is going to invest in recycling and rebuilding the skills of the people whose jobs have migrated south and east? If Chartered Institute of Personnel and Development (CIPD) in the United Kingdom and their counterparts do not take action soon to extend continuous professional development opportunities, an entire generation of HR managers seems destined for the scrap heap.

Calling all HR managers in Europe. HRO is coming your way and it is an irresistible proposition. So if you want to be part of the future in HR, act now. Make sure your skills are up to the new tasks that will be coming your way once your routine administration has gone offshore, to Central Europe or farther - because it will.