Rinaldi faced a greater outcry when he moved R&D jobs from the EU to India as part of another offshoring contract. This phenomenon — in which offshoring to emerging overseas economies incites more of a backlash than "near-shoring" to an economically, ethnically, and culturally similar country — is one reason that many large offshoring companies like India-based Wipro and Infosys are setting up "near-shore" facilities in Canada and the United Kingdom. Many are even repositioning their service offerings so that they can give companies the option of keeping some of the outsourced positions within the United States instead of offshoring everything right away.
"You can see the relief on the CFO's face when you tell him he doesn't have to offshore to get the savings," says Craig Tobin, senior vice president of sales for Dublin- and Stamford, Connecticut-based Equitant. "We tell them they can keep the jobs here now, improve their processes, and when they're ready, they can offshore."
Tobin also points out that many CFOs are considering outsourcing to large U.S.-based companies, like IBM Global Services, so "they can say, 'We've gone to IBM, so we're not making the decision to offshore those jobs.'" That way, any future decision to offshore will be the outsourcer's decision, not the CFO's.
CFOs at companies that offshore say that while they're not doing any less than they did before the backlash, they are trying to be more "sensitive" about how they handle the offshoring process. IBM Global Services, for example, which was lambasted in the press for asking laid-off employees to train their offshore replacements, has ended that practice, and, according to IBM spokesperson Clint Roswell, "We've redoubled our retraining efforts for people whose skills are no longer in demand from our customers."
Tell the Story
CFOs already make the effort to explain the rationale for offshoring to their employees. When Gene Godick, CFO of Malvern, Pennsylvania-based Verticalnet Inc., sent software product development to India through Symphony Services, he spent a lot of time talking with employees. Some were more receptive than others. "We had one employee [who was being laid off] who called our CEO unpatriotic," recalls Godick. That employee was later rehired, he says, for one of the new jobs made possible by the savings incurred by the offshoring contract. "The employees respected our honesty," says Godick. "A lot of companies just tap employees on the shoulder and say, 'See ya.' " In fact, he says, the senior development team in the States helped select the offshore provider. "They knew why we had to do it," he says.
If CFOs can sell offshoring to employees, one wonders why they can't do a better job of selling the concept to the public.
Several companies, including Genworth Financial Inc. (a GE insurance spin-off) and Gillette Co., have issued statements in their annual reports warning about the potentially negative financial consequences of state and federal anti-offshoring legislative proposals. Others have launched aggressive lobbying efforts against the legislation, although in keeping with the "radio silence" approach to the backlash, they refer to these efforts only obliquely.
"It's still too early to tell what the far-reaching business effects will be of the current debate. We're making sure that the positive offshoring story is part of the dialogue," says GE's Stack, "but we're not aggressively telling the story." In other words, lobbyists for companies like GE are working hard on influencing the legislative angle, but saying little publicly.
The continued public silence is also curious because companies have no plans to stop moving some operations overseas. Some, it is true, are delaying the initial move until the political furor subsides. But of those that are currently offshoring, 64 percent plan to increase their offshoring levels, and another 23 percent plan to keep their levels constant. Lucent's Rinaldi says he has no plans to pull back. "In an election year, no one is going to vote for fewer jobs and higher taxes, but you can't avoid the global economy that we're in," he says.
Indeed, whether or not the American public likes offshoring, many CFOs feel strongly that they have no choice. "The markets demand offshoring," explains Verticalnet's Godick. "There are venture capitalists out there that won't fund a company unless there's a plan to offshore parts of development. There's a huge disconnect between politics and reality as far as what companies are doing." He adds, "It's hard for me to sit here and tell a shareholder, 'We're going to be patriotic. We're keeping jobs here. You don't mind if we get lower returns, do you?' "
"There has been a tremendous willful disregard for the global nature of our economy right now," echoes Stack. "The small tool-and-die plant in Illinois is competing with a plant in Bangalore."
CFOs, in other words, are in the uncomfortable position of telling Americans that they are truly competing for jobs with the rest of the world, including countries where people are college-educated, creative, ambitious, smart, and willing to do the job for less than half the pay.
"Right now, no one is talking, because it's such a politically sensitive issue," says Garcia. "But now is the time to get the message right. Soon, [offshoring] will be ubiquitous, and anyone who's not doing it will be off the competitive map."
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