Business Horizons (2005) 48, 513 — 523

www.elsevier.com/locate/bushor

Another look at offshoring: Which jobs are at

risk and why?
Martin Stack*, Ricard Downing

Helzberg School of Management, Rockhurst University, 1100 Rockhurst Road, Kansas City,
MO 64110, USA

KEYWORDS Abstract Many recent articles regarding offshoring have made sweeping, industry-
Offshoring; wide generalizations about the impact of this process, but have not typically
Outsourcing; addressed the specific types of jobs that are at risk and why. In this paper, we
Healthcare; develop a framework that integrates several key variables—the (changing) need for
Information technology proximity, the regulatory environment, firm-level security and intellectual property
rights concerns, and the socio-political context within which the offshoring
phenomenon is unfolding—which collectively help explain how vulnerable particular
jobs are to offshoring. We use this framework to examine what types of healthcare
and information technology jobs are most and least at risk to offshoring, and suggest
extending this model to other industries in order to better understand which jobs are
most vulnerable to offshoring and why.
D 2005 Kelley School of Business, Indiana University. All rights reserved.

bThere is no job that is America’s God-given right
anymore.Q
—Carly Fiorina, former Hewlett-Packard CEO
(Drezner, 2004, b 10)
bEverything you can send down a wire is up for
grabs.Q
—Nandan Nilekani, Infosys Technologies CEO
(Drezner, 2004, b 10)
bWho needs to pay us $350,000/yr if they can get a
cheap Indian radiologist for $25,000/yr?Q
—(Pollack, 2003, b 4)
T Corresponding author.
E-mail addresses: martin.stack@rockhurst.edu (M. Stack)8
rick.downing@rockhurst.edu (R. Downing).
0007-6813/$ - see front matter D 2005 Kelley School of Business, Indiana University. All rights reserved.
doi:10.1016/j.bushor.2005.04.001
1. Offshoring does not equal outsourcing
In November of 2002, Forrester Research released a
research brief entitled b3.3 Million U.S. Services
Jobs to go Offshore.Q (McCarthy, Dash, Liddell,
Ross, & Temkin, 2002) The following February,
Business Week discussed the offshoring phenom-
enon in a cover story entitled bIs Your Job Next?Q
(Engardio et al., 2003) These two reports stimu-
lated a series of additional studies (e.g., BBC News
World Edition, 2003; Economist, 2003; Gartner
Research, 2004; Gentle, 2003; Greenhouse, 2003;
Moran, 2003; National Association of Software and
Service Companies, 2003) which provided anecdo-
tal evidence of a great migration of white-collar
service jobs offshore. Offshoring, or offshore out-
sourcing, became a major topic surrounding the
514
2004 presidential election, and major newspapers
and magazines have continued to cover the issue
since then. However, while many scholars have
discussed the offshoring of manufacturing produc-
tion, the offshoring of services has not yet received
the same level of analysis (Fig. 1).
In 2004, Pfannenstein and Tsai offered a syn-
thesis of the literature regarding services off-
shoring, but the paucity of scholarly references
reflects the basic fact that there has not yet been
much academic discussion of this phenomenon.
The first series of scholarly articles on this topic
began to appear in 2004. One particularly impor-
tant collection of articles is found in the 2004
Special Issue of the Indian Journal of Economics
and Business, which contains 15 academic articles
on offshoring.
Most practitioner-oriented articles thus far have
focused on one of two issues: estimates of how
many jobs have been or will be sent overseas, or
assessments of how advantageous offshoring really
is once indirect and direct costs are factored in.
While the debate regarding the scale and profit-
ability of service sector offshoring will undoubtedly
continue for the foreseeable future, one issue that
physical proximity to the
Socio-Political context
Is there a law or regulation
within which the offshoring
preventing the job from
phenomenon is unfolding:
− isolated incidents of
constraint
− forcing new regulatory
initiatives
− backlash
property rights, Privacy,
Figure 1 Framework for job offshoring decision making.
M. Stack, R. Downing
has not generated as much discussion concerns the
types of jobs most at risk for being offshored. In
direct contrast to initial examples of service sector
offshoring from the early 1990s, more recent
examples have gained wider attention as it has
come to light that, perhaps for the first time, some
higher-skill jobs may also be at risk. This paper
develops a framework that addresses the reasons
for and implications of these developments.
The first step is to define key terms. Although
some consensus is beginning to emerge regarding
the terms boutsourcingQ and boffshoring,Q early
articles often used the term boutsourcing,Q even
when truly focused on the phenomena of jobs being
shifted overseas or offshoring. More recent articles
such as Schultze (2004) use the terms as defined in
Table 1.
Offshoring occurs when firms transfer jobs
abroad for work that has traditionally been done
in their home country. For example, when an
American company sends manufacturing operations
to Mexico or a call center to India, it is offshoring
work and jobs from America to Mexico or India. In
this scenario, the company is sending jobs typically
done in America to another of its own branches in
Proximity
Does the job require
yes
workplace?
no
Regulatory
LESS
yes Likely to be
being done abroad? Offshored
no
Firm Level
Security, Intellectual yes
Risk
no
MORE
Likely to be
Offshored
Another look at offshoring 515

Table 1 Definitions of offshoring, domestic outsourcing, and offshore outsourcing

Term Definition
Offshoring A company moves existing U.S.-based jobs to one of
its own branches or subsidiaries in another country
Domestic Outsourcing A company decides to bhire-outQ jobs traditionally
done bin-houseQ
Offshore Outsourcing A company decides to bhire-outQ jobs traditionally done
bin-houseQ to a firm in another country in which the
hiring company has no direct ownership and over which
the company has no direct authority or control.
Example
Dell Computer moves help-desk jobs to its
own offices in Mexico.
OR
Google opens its first engineering R&D center
in Bangalore, India, but continues to manage
the operation.
A large bank holding corporation contracts
with an outside firm located in the U.S. to
carry out its check processing operation.
Dell Computer contracts with a firm based
in China to carry out a percentage (or all)
of its help-desk support operations.

another country. One of the challenges in estimat-
ing the dimensions of the offshoring phenomenon is
that many American firms are loathe to report
precisely the amount of work that had been done
by Americans that is now being handled by foreign
workers.
In contrast, domestic outsourcing refers to steps
taken by American companies to hire out to other
U.S. firms work that had previously been handled
internally. For example, an American telecommu-
nications firm might determine it would be more
efficient to contract with a U.S.-based market
research firm, rather than continue to perform
such work internally. This is part of the bmake or
buyQ decision, with which all firms grapple as they
determine how vertically integrated they should
be. Although the term only lately seems to be
generating a lot of public discourse, firms have
always been engaged in some form of outsourcing,
since it is never clear exactly where the vertical
integration line should be drawn. As regulations,
technologies, and competitors change, the optimal
vertical boundaries for individual firms will natu-
rally evolve. While difficult for the departments
that are eliminated, this process may not cost jobs
if new firms hire additional staff for the contracts
they win; in fact, if this process allows firms to
become more efficient and concentrate on what
they do best, the net number of jobs in the overall
economy may actually grow.
Yet, it is not domestic outsourcing that has
gained the media’s attention; rather, it is the
sending of jobs overseas, either when firms have
outsourced work to another foreign company (off-
shore outsourcing) or to one of its own foreign
subsidiaries (offshoring, but not outsourcing). An
American firm may send operations to another
country, but continue to manage the process
internally. For example, in late 2003, Google
announced plans to open its first engineering
research and development center outside of the
United States. This center will be based in Banga-
lore, India; however, since Google will continue to
manage this operation, this is an example of
offshoring, but not outsourcing (Mangalindan,
2003). An American firm may also contract with a
foreign firm for operations that had been handled
internally. Several years ago, Delta Airlines con-
tracted with firms in India and the Philippines to
handle many of its reservations. In this case, an
American firm offshored and outsourced work that
had been done domestically by company employees
(McCarthy et al., 2002).
An important dimension of the current offshoring
debate concerns the types of jobs affected.
American companies began offshoring large num-
bers of manufacturing jobs in the 1970s and 1980s.
In a sense, this followed an earlier pattern of
moving jobs from higher wage parts of the U.S. to
lower cost areas; however, moving jobs out of the
country, while a logical extension of this strategy,
was more complicated and depended on several
additional developments. The offshoring of manu-
facturing jobs did not emerge as a large scale issue
until low wage rates in countries such as Mexico and
China were combined with a number of other
variables, including:
! Falling transportation costs driven in part by
dramatic improvements in containerization and
supply chain management;
! Falling international trade barriers that facili-
tated the exporting of products to the U.S.;
! Declining barriers to foreign direct investment
that encouraged multinationals from the U.S.
and other western countries to invest in produc-
tion and distribution facilities in foreign nations;
and
! Improving worker and production standards
which, over time, raised the quality of the
goods produced in foreign nations to U.S.
standards.
516
Collectively, these variables helped pave the
way for the slow but steady decline of the U.S.
manufacturing base, which fell from 28.6% of the
GDP in 1950 to 15.5% in 2000 (Schiller & Trebing,
2003).
Manufacturing-based offshoring, though criti-
cized by those directly affected, did not resonate
as a rallying cry in an economy that was becoming
increasingly dependent on services. In his article
on surviving the services revolution, Karmarkar
(2004) describes the focal shift from manufactur-
ing offshoring to services industry offshoring. He
states that bwe are now riding a tidal wave of
change we can think of as the industrialization of
services.Q (p. 100) According to Harvard economist
Dani Rodrik, politicians and opinion leaders did not
pay attention to offshoring until they began to see
btheir neighbors being displaced,Q which did not
occur until the 1990s, when a large and growing
number of service sector jobs became capable of
being offshored (Davis, 2004, b 9). Just as large-
scale offshore manufacturing depended on the
alignment of several important factors, so too the
emergence of service sector offshoring depends on
several new developments. As with manufactur-
ing, lower wages for core service jobs is key. Just
as manufacturing offshoring depended on govern-
ment trade policies that reduced tariffs on exports
and facilitated foreign direct investment, the
offshoring of service jobs, at least in some key
industries, depends on government restrictions
regarding whether the work can be performed
overseas, perhaps outside traditional regulatory
purviews.
Yet, there are two important differences, as
well. First, whereas manufacturing workers did
not require university education, many service
jobs require some level of higher education.
Second, in order for companies in the U.S. to
utilize skilled lower-wage English-speaking workers
offshore, they require dramatically lower commu-
nication costs and improved telecommunication
technologies to facilitate the immediate world-
wide transfer of large amounts of data. This last
factor has proven particularly important. Accord-
ing to Drezner:
b. . .technological innovation has converted what
were thought to be nontradeable sectors into
tradeable ones. Manufacturing sectors have long
been subject to the rigors of global competition.
White-collar service sector workers are being
introduced to these pressures for the first time—
and they are not happy about it.Q (2004, b 32)
DeLong and Cohen (2004) make a similar point as
they examine the parallel between the late 19th
M. Stack, R. Downing
and early 20th century advances in transportation
technology that led to the creation of international
markets for many agricultural and industrial goods,
and the recent advances in communication tech-
nologies that are creating international markets for
many services.
A potential difference between manufacturing
and service offshoring, however, is rapidity. It
took decades for the world trading system to
agree to systematically reduce tariffs on imported
goods, whereas bservice trade isn’t much affected
by tariffs, and can move as rapidly as the
improvements in computers and communications
allow. Therefore, the job loss can be more
sudden.Q (Davis, 2004, b 8) Thus, estimates that
the number of jobs lost so far to services off-
shoring is rather insignificant may not tell the
whole story if the floor is being readied for a
more rapid redesign of the coordination of global
services. This paper, however, is not intended to
contribute to the ongoing discussion regarding the
potential impact offshoring poses to the economy.
Instead, it seeks to approach the issue from
another perspective: Given that we are experi-
encing the offshoring of services and that nearly
all projections are for increases in these numbers,
can we begin to examine and forecast the types
of service sector jobs that are most and least at
risk for offshoring?
2. Determining which jobs are vulnerable
to offshoring
Several discussions regarding the impact of off-
shoring have been conducted on a relatively
general level by attempting to rank which indus-
tries are at greatest and least threat. Harper
(2003), for example, highlights the five industries
he believes are most insulated from offshoring:
healthcare, other in-person jobs (such as teach-
ing), real estate, financial services, and security.
However, it is not clear that industry-level gen-
eralizations like these are the most useful way to
investigate the offshoring phenomenon. We
believe a better approach is to examine specific
jobs within particular industries to assess the
likelihood of offshoring.
We have developed a framework which relates
the changing requirement of some work for direct
physical presence in the U.S. (proximity), the
regulatory environment, firm-level concerns
regarding such issues as privacy and intellectual
property, and the broad socio-political environment
in which agents make decisions regarding offshor-
ing. Our framework illustrates how these factors
Another look at offshoring
interact to shape the degree to which a particular
job is threatened by offshoring.
The framework begins by examining how a series
of key developments is redefining the need for
personal interaction and/or geographic closeness
(proximity) for some jobs. While other commenta-
tors have made similar observations, our position is
a bit different. First, we believe the analysis should
occur at the job-level rather than the industry-
level, since closer examination reveals there are
safe and unsafe jobs even within Harper’s five
bsafeQ industries.
Second, while we believe history aids in under-
standing how markets evolve, we feel the rapid
changes of the last 15 years make it difficult to
project future job losses based on past patterns.
This, too, separates us from other commentators.
For example, Drezner (2004) asserts that offshoring
has been blown out of proportion, since bclose to
90% of jobs in the U.S. require geographic
proximity.Q (b 13) According to Drezner, if the
services bhave to be produced and consumed
locally. . .outsourcing them overseas is not an
option.Q (b 13) However, since the offshoring of
services phenomenon is largely a function of
emerging developments that have made new
approaches technically feasible and economically
viable, it may not be appropriate to forecast future
job immunity to offshoring based on the degree to
which such work formerly, or even currently,
required proximity.
A number of variables combine to determine the
degree to which a worker must be based in the
United States, and as these variables change over
time, the ability to offshore a particular job may
increase or decrease. One particularly important
factor is technology. Dramatically lower telecom-
munication costs, significant increases in telecom-
munication capacity, and radical improvements in
computerization and digitization have redefined
the range of services that may be provided
remotely (McKinsey Global Institute, 2003).
Together, this combination of developments is
calling into question many long-held assumptions
regarding which services must be delivered by
nearby providers (proximity). While Drezner
(2004) may be correct that historically 90% of jobs
required close geographic proximity, it is clear that
technology is steadily expanding the range of
services that can be provided remotely. Fitzgerald
(2004) relates the example of how fast food orders
at some McDonald’s restaurants in Missouri are now
routed through a call center two states away in
Colorado. This is a simple yet telling example of
how emerging technologies are redefining the need
for proximity for certain service workers, and
517
serves to confirm our assertion that analysis should
occur at the job level.
If the first box of the framework examines what
is becoming possible, the second examines how the
regulatory environment helps shape which of these
new technologies can be adopted by firms and
organizations. The regulatory environment is
dynamic and can act to facilitate or restrict
offshoring. If the U.S. government passes legisla-
tion that restricts the ability of firms to offshore
specific jobs, the game is over. On the other hand,
if the government rescinds long-standing legislation
mandating specific work be done by Americans or in
America, new opportunities for offshoring may
emerge. A nation’s specific rules and regulations
evolve over time, and these changes will have a
dramatic impact on the types of jobs a society will
allow to be offshored. If a law prohibits certain
healthcare procedures from being done outside the
U.S., the development of new communication
technologies facilitating such work is immaterial;
however, if the regulatory environment allows
specific tasks to be done overseas, this raises a
new set of questions.
Once a firm has determined it is not restricted by
law from offshoring and new technologies have
altered the economic calculus in favor of moving
jobs traditionally done at home to new overseas
providers, the third box in the flow chart asks
whether there are security, quality, privacy, or
intellectual property concerns that may discourage
the firm from offshoring certain jobs. While
technology may make the offshoring of specific
jobs financially feasible, companies may still elect
not to offshore key functions if they are concerned
about the security of key processes or products.
This has been a significant issue for many firms in
the information technology sector.
Finally, suppose an organization has determined
some new technology has rendered proximity
unimportant, and does not find any compelling
regulatory or firm-level concerns. Are there still
factors, then, that may inhibit offshoring? We
illustrate that these three decisions are all made
within a broader socio-political context in which,
for example, there may be community or other
pressures that restrain offshoring. According to
Tarun Das, head of the Confederation of Indian
Industry, bThere is no economic limit to what can
be outsourced to India. The only limit is a political
backlash in the west against the migration of jobs
to India and elsewhere.Q (Roberts & Luce, 2003, b
10) A recent example of this backlash occurred
when several American states revised government
contracts to require the work be done internally by
an American firm, rather than sent offshore. In
518
2003, the governor of Indiana cancelled a contract
with an Indian company, even though its $15 million
bid was $8 million below its nearest U.S. rival
(Alden, 2004). In this instance, the socio-political
backlash against offshoring trumped traditional
concerns of procuring optimal value for a state’s
taxpayers and serves to redefine the term bbest
deal.Q
During the past year or so, interest groups have
begun pressuring politicians for regulatory reform
to address the threat offshoring poses. Thirty-one
states recently enacted legislation prohibiting
state agencies from using foreign offshore labor
(National Conference of State Legislatures,
2004a), and 32 federal bills are currently being
considered by the United States House of Repre-
sentatives that address various aspects of offshore
outsourcing (National Conference of State Legisla-
tures, 2004b). These legislative proposals reflect
some of the broad pressures being exerted on poli-
ticians and firms as they make decisions regarding
offshoring.
We believe decisions to offshore are shaped by
broad socio-political forces, as well as by the three
specific factors discussed above. Before we illus-
trate how this framework can be applied to some
specific industries, it is important to address briefly
another issue this discussion raises: the skill level of
jobs threatened by offshoring. Drezner (2004)
quotes from an International Data Corporation
analysis that bthe activities that will migrate off-
shore are predominantly those that can be viewed
as requiring low skill, since process and repeat-
ability are key underpinnings of this work.Q (b 13)
Mann (2003) echoes the view that jobs such as
binsurance claims clerks, word processors, and
secretariesQ (p. 9) may be good candidates for
offshoring, and concludes that bwhat is notable
about all these jobs is that they are at the low-
wage, low-skill end of the job spectrum.Q (p. 9)
While this characterization was certainly true at
first, one of the most interesting recent develop-
ments has been the steady offshoring of progres-
sively higher-skill work. In fact, it is now emerging
that some medium- and high-skill jobs within
particular industries are at greater risk for off-
shoring than lower-skill jobs within the same
industry that require proximity and/or face specific
regulatory hurdles. This development regarding
skill level further distinguishes service sector from
manufacturing offshoring.
The immediate future of offshoring will reflect
the interplay of technologies (which steadily
increase the range of jobs that may be offshored)
and regulatory environments and company policies
(which will determine which of these jobs will, in
M. Stack, R. Downing
fact, be offshored). In order to get a fuller sense of
how the framework may be applied to specific
industries, we offer partial analyses of two quite
different ones: health care and information tech-
nology. Healthcare is important for consideration
both because of its size (it accounts for approx-
imately 15% of GDP (Smith, Cowan, Sensing, &
Catlin, 2005) and because several commentators
have judged it as relatively bsafeQ from offshoring.
Information technology is also important, not only
because it represents one of the most vibrant
sectors of the overall economy, but because some
writers view it as at relatively great risk to
offshoring. The U.S. Department of Commerce
estimates that by 2006, almost half of the U.S.
workforce will be employed by industries that are
either major producers or intensive users of
information technology products and services
(U.S. Department of Commerce, 1999). More
nuanced reviews of each industry show industry-
wide generalizations are often inaccurate, and
must be replaced by analyses which concentrate
on specific job-level characteristics.
2.1. Is healthcare safe?
According to Harper, healthcare is one of the
industries least threatened by offshoring, since
bYou can’t go overseas to see a doctor or nurse or
get physical care.Q (2003, 5 Safer Sectors section)
This assertion, however, ignores the basic fact that
some healthcare jobs are in the vanguard of the
offshoring movement. A more accurate statement
would be that the range of healthcare jobs being
offshored has steadily increased, to the point
where it now includes professional, semi-profes-
sional, and non-professional healthcare jobs. By
applying our framework to healthcare, we can see
how offshoring has evolved in this complicated but
important industry.
The story begins in the early 1990s with the
impact a series of computer and communications
advances had on several lower-skill, lower-wage
healthcare jobs in areas such as transcription
services, insurance claims, and billing. These
innovations ended the longstanding requirement
these workers be based in the U.S. near specific
healthcare facilities. As the geographic link was
broken, it became apparent these and similar jobs
could be performed abroad in countries such as
India. Currently, somewhere between 4% and 10% of
the $15—20 billion U.S. medical transcription
industry is routed to India. The impact on individual
workers has often been devastating. Maher (2004)
recounts how Sheryl Matta, an American medical
transcriptionist, now earns about half of what she
Another look at offshoring
made several years ago, as her pay has fallen in the
increasingly internationalized transcription indus-
try. So seamless has this transition been that many
American doctors do not even realize they are
actually using offshore transcription services. Their
level of awareness is likely to improve though, as a
growing number of offshore transcription firms are
exhibiting at the Medical Group Management Asso-
ciation’s (MGMA) annual meeting (Chin, 2003). As
technology improves, as clients and suppliers
develop closer relationships, and as costs continue
to fall, we are likely to see further offshoring
pressures for lower-skill healthcare jobs in coming
years.
As telecommunication costs declined during the
1990s and as a range of new technologies were
introduced, a second wave of more sophisticated
and complex jobs began to emerge as offshoring
candidates. During this stage, offshoring began to
impact not only lower-skill healthcare jobs, but jobs
which required college degrees and extensive train-
ing. The terms blow-skill,Q bmedium-skill,Q and
bhigh-skillQ are somewhat problematic. For health-
care, these terms roughly translate to the amount of
formal education required: lower-skilled jobs do not
typically require a college degree, medium-skilled
jobs require at least a bachelor’s degree (such as a
nursing degree), and high-skilled jobs require a
medical degree or its equivalent. For example, some
managed care plans developed Ask-a-Nurse pro-
grams, through which members were able to call
licensed nurses 24 h a day for a range of medical help
and advice. As communication costs fell and mem-
ber databases improved, it became apparent that
large numbers of English-speaking nurses in devel-
oping countries such as India and the Philippines
could help staff these programs. The potential
offshoring of nursing jobs marked a significant
transformation in terms of the healthcare positions
that were capable of being sent abroad.
The third wave of this process was made possible
by recent advances in technology, which have
enabled a small but growing number of high-skill
physician services to be sent abroad. Perhaps the
most well-known example concerns radiology. As
imaging equipment began to allow radiologists to
read scans remotely, the potential emerged for
these scans to be read not simply in the next
hospital or city or state, but in other countries by
significant numbers of English-speaking physicians.
Roberts (2004) relates the story of how Jonathan
Schlakman, a Harvard-trained radiologist based in
Jerusalem, read a Philadelphia woman’s computer-
aided tomography (CAT) scan moments after her
arrival at a hospital, and from Jerusalem made the
decision regarding whether the patient needed
519
surgery. This is an example of offshore outsourcing
of the professional interpretation of radiographic
imagery. According to Dr. Schlakman, radiography is
a very good candidate for offshoring, since ba lot of
it is based on computer imaging, which you don’t
have to be physically present for.Q (Roberts & Luce,
2003, 4) Andrew Pollack’s recent New York Times
article bWho’s Reading Your X-Ray?Q (2003) detailed
a series of examples regarding the offshoring of
radiology jobs.
One potential ramification of this process is the
impact of offshoring on radiologists’ salaries.
Currently, radiologists are among the highest paid
physicians, while primary care physicians are the
lowest paid. Many radiologists are wondering why
anyone would continue to pay high salaries in the
U.S. when the same job can be performed offshore
for less than 10% of U.S. salary levels (Pollack,
2003). While radiology has received the most
attention, other high-skill physician jobs such as
the analysis of tissue samples (pathology) and the
reading of electrocardiograms can also be offsh-
ored. In general, most physician services that can
be done through the growing field of telemedicine
are candidates for offshoring.
Yet, the developments listed in box 1 that make
offshoring possible are only part of the story. Equally
important are regulatory and firm concerns that
restrict the utilization or implementation of these
new technologies. Pollack (2003) noted the primary
factors restricting radiological offshoring right now
are not technological, but regulatory. For example,
in the U.S., radiologists have to be licensed by the
states in which they practice and credentialed by
the hospitals for which they work. The American
College of Radiology has already begun debating
what steps can and should be taken to prevent or
regulate the offshoring of radiology jobs. Does this
simply reflect a protectionist reaction by a special
interest group, or does this process raise legitimate
concerns about quality, safety, privacy, and job
security? As mentioned previously, regulatory envi-
ronments are dynamic. In coming years, rules
regarding the offshoring of physician services will
be heavily debated, featuring both physicians con-
cerned about their salaries and insurers footing the
bill for rising healthcare expenses.
In addition to limitations imposed by the govern-
ment, the framework also demonstrates that firms
may elect not to offshore for privacy, security, or
quality concerns. An interesting example of how
these concerns can affect decision making in
healthcare comes from the transcription services
industry. As noted above, this was one of the first
jobs aggressively courted for offshoring, and within
a relatively short period of time, hundreds of
520
millions of dollars of transcription services were
sent overseas. However, in 2003, a transcriber in
Pakistan threatened to post patient files on the
Internet unless she was paid money she claimed a
contractor owed her. The files were from the
University of California-San Francisco, although its
officials claimed they had no knowledge their files
were being transcribed in Pakistan. Privacy con-
cerns, especially those associated with the require-
ment of the Health Insurance Portability and
Accountability Act (HIPAA), imply that although
technology and communication improvements
make offshoring transcription jobs economically
feasible, hospital and physician groups may eschew
this option if concerns about privacy cannot be
alleviated.
Finally, our framework demonstrates the three
previous sets of decisions are all made within
America’s broader socio-political context. One
example of how this backdrop affects offshoring
can be seen in Medicare reimbursement policies.
Medicare does not reimburse procedures done
outside the U.S., so under this policy, it will not
reimburse radiological services performed abroad.
The advocacy group American Citizens Abroad has
been lobbying for years to change the rules which
restrict Medicare from paying for healthcare serv-
ices abroad. Now, they are likely to be joined by
insurers and others who see the ability to offshore
medical services as a way to lower healthcare
costs. Collectively, these groups represent some of
the positive pressures for offshoring that may
emerge from the socio-political framework. Of
course, these efforts will be counterbalanced by
groups such as the American College of Radiology,
which published its own rather restrictive guide-
lines in 2004 regarding the offshoring of radio-
logical services (Chin, 2004).
By applying our framework to the healthcare
industry, we have shown the generalizations that
deem this industry bsafeQ from offshoring are
inaccurate. At the same time, it must be empha-
sized that only a subset of health care jobs have so
far proven amenable to offshoring; thus, while
technology is expanding the range of positions that
can be performed remotely, to date this remains a
small percentage of the overall number of health-
care jobs. However, as the discussion for medical
transcriptionists (and perhaps for radiologists)
shows, the average bsafetyQ of an industry can
mask great job-specific insecurity.
2.2. Are information technology jobs at risk?
Another important industry which may be eval-
uated is Information Technology (IT). While many
M. Stack, R. Downing
commentators have classified healthcare as rela-
tively bsafeQ from offshoring, many have also
generalized IT as bat risk.Q Yet, just as the last
section illustrated some healthcare jobs are at risk
from offshoring, it is equally true that many IT
positions are not at direct risk. Again, it is
important to evaluate each industry in terms of
the interplay of the need for proximity and the
salient regulatory and firm-level issues in order to
determine which specific jobs are most and least
threatened by offshoring.
As with healthcare, the first set of IT jobs to be
offshored during the early 1990s were in the lower-
skill category. The best known examples involved
help desks, which act much like a triage center in a
medical facility, determining which problems can
be solved relatively easily by help desk personnel
over the phone and which require a desktop
support person to resolve the issue. Help desk
activities are commonly divided into two catego-
ries: vendor and user. Vendor help desk personnel
typically focus on tasks such as initial setups and
the restoring of systems to original setup specifi-
cations, while user organization help desks answer
questions such as bHow do I do this?Q or bWhy
doesn’t this work?Q Since many help desk activities
have typically been handled over the phone,
improvements in communication technologies have
made these tasks a particularly attractive target
for offshoring.
As firms gained confidence and experience in
offshoring help desk and other lower-skill IT duties,
they next began to offshore some medium skill-jobs
such as computer programming. Programmers
write, test, and maintain the detailed instructions
that direct computers to convert data into infor-
mation. The project-oriented nature of program-
ming, the ease of creating and testing programs
remotely, and the ability to communicate with
analysts and designers remotely via telephone or
email for clarification and problem resolution have
combined to make programming open to both
outsourcing and offshoring. Thus, while program-
mers require a much higher level of training,
education, and experience than help desk person-
nel, one common feature of their work is the
declining need for direct physical proximity to the
end-user.
Declining telecommunication costs and concom-
itant technological advances have combined to
make the offshoring of a range of lower- and mid-
skill IT duties both feasible and economical. Yet,
although IT is often held up as an industry most
threatened by offshoring, it is important to recog-
nize that the majority of higher-skill IT jobs are not
yet suitable for offshoring. Before we continue with
Another look at offshoring
our analysis, let us briefly consider a higher-skill IT
field in which proximity has not yet been rendered
immaterial.
Network administrators install, configure, main-
tain, and administer an organization’s physical
network infrastructure and network operating
system(s). Their general operational duties include
developing and monitoring a network dial-up plan
or virtual private network connection for company
employees, analyzing a corporate network in the
context of application and client—server environ-
ments, and addressing issues of performance,
interoperability, security, and transition. Most
experts agree this job function will continue to
grow steadily in terms of responsibility, complexity,
and frequency. The speed and efficiency of a
company’s network is essential to the bottom line,
and network engineers who can improve these
areas are in high demand.
Network administrator positions typically require
a bachelor’s degree in computer science or informa-
tion systems and 3 to 5 years of experience. In
addition, most companies require specific vendor
certifications such as Microsoft Certified System
Engineer (MCSE). The hands-on nature of the
position, the continuing escalation of additional
responsibilities including network security, and the
fast-changing nature of technology require the
direct physical presence of the network administra-
tor. As a result, it is unlikely that this position will be
at any immediate risk for offshoring.
Now, let’s return to the framework. In health-
care, improvements in technology rendering dis-
tance unimportant have, in many instances, run up
against restrictive regulatory concerns which pre-
vented the offshoring of specific work (box 2). Yet,
for many industries, including IT, the government
does not have a vested interest in specifying which
specific jobs can be sent overseas. While there may
occasionally be some areas of concern (perhaps if
the government believed national security issues
were involved), for the most part, companies
looking to offshore IT work do not face systemic
regulatory hurdles.
However, as we move down to box 3, it is clear
that many companies self-regulate in terms of
what types of IT work they are willing to offshore.
There are a host of firm-level concerns that may
lead organizations to elect not to install new
proximity-ending technological advances. For
example, a company may worry about losing
control over intellectual property, or that off-
shoring will threaten the secrecy or security of
market or product knowledge. These types of
concerns play a greater role in industries such as
IT than in many areas of healthcare, where the
521
basis of competitive advantage may not be as
fungible.
Finally, just as the broad socio-political frame-
work influences how healthcare organizations make
their decisions regarding offshoring, so too do these
influences shape whether firms will offshore spe-
cific IT duties. A company may find a new
technology has enabled the offshoring of some IT
work and determine it to be a relatively low-risk
area to offshore; however, if community pressures
mobilize against this type of relocation, the
company may reevaluate its decision to offshore.
As these broad pressures change over time, this will
affect the decision making calculus for firms
considering offshoring.
This review of the IT industry illustrates how
generalizations about an industry being at grave
risk for offshoring can be inaccurate. A more useful
and accurate analysis begins at the level of the job,
explores how technology has affected the ability of
specific tasks to be offshored, and examines what
regulatory and/or firm-level concerns may restrict
firms from introducing these new technologies.
3. Gathering evidence from other
industries
This paper is concerned with trying to understand
what types of jobs within specific industries are
most and least at risk for offshoring. The basic
explanatory framework integrates the changing
need for proximity with evolving attitudes by
regulators, firms, and the broad socio-political
climate regarding whether firms should convert
the newly possible into the actual. The next step is
to extend this analysis to other industries. For
example, during the past two years, a number of
articles have described how specific jobs in a wide
range of industries are beginning to emerge as
offshoring candidates. Yet, thus far, there have
been few attempts to systematically analyze how
and in what context these offshoring decisions are
being made.
A recent New York Times article discussed how
Reuters was hiring some journalists in Bangalore,
India to do basic financial reporting on 3000
small- and mid-sized American companies (Stein-
berg, 2004). Beginning with the first box of our
framework, falling communication costs and
increasing on-line datasets and databases have
enabled the offshoring of some journalist jobs that
had traditionally been done in-house by local
workers. Presented with this new opportunity,
Reuters had to evaluate whether these jobs
involved key proprietary assets, and determine
522
whether the government had a vested interested
in regulating where this type of work is completed
(boxes 2 and 3). As with healthcare and informa-
tion technology, the first level of journalist jobs to
be offshored have been lower-skill; however, as
the earlier reviews of those industries also show, it
is entirely possible that, over time, more and
more sophisticated jobs may become amenable to
offshoring.
Another example comes from the accounting
industry. Some firms have recently begun to
prepare the more standardized portions of some
tax returns in India. The Indian firm Mphasis is using
a new document management software package
called Livelink to create a dynamic, interactive tax
chat room that allows workers in India and the U.S.
to share documents and review each others’ work
(Roberts, 2004). While new technologies are
greatly facilitating this type of coordinated, intra-
firm work, company concerns over privacy and
security have slowed the pace at which some of
these innovations have been adopted. Although
government regulations and the broader socio-
political environment do not yet seem to have
affected this offshoring niche, it would take only
one example similar to the threats made by the
Pakistani medical transcriptionist to quickly bring
this area under greater review.
Legal services constitute a third industry that
has recently entered the offshoring arena. Abhay
Dir has set up a legal research firm which charges
60 dollars per hour to study state legal precedents,
a steep discount to its American counterparts,
which charge 350 dollars an hour and up (Schoen-
berger, 2005). Dir’s business model emerged as
more U.S. case law was digitized and put on-line
during the 1990s. As the editor of the magazine
American Lawyer suggested, bcommodity legal
work that is largely repetitive can be done by
intelligent lawyers anywhere.Q (Maher, 2004, b 27)
Matthew Powers, a California patent attorney,
echoes this view, arguing that blegal services are
no different than any other services—there are
some that can be commoditized, like data collec-
tion and low-level legal research.Q (Schoenberger,
2005, Research, Not Advice section, b 4) However,
Powers goes on to argue that there are some legal
services bthat can never be outsourced, especially
when it comes to exercising legal judgment.Q
(Schoenberger, 2005, Research, Not Advice section,
b 4) Yet, one of the unsettling themes of our essay is
that as technologies and rules evolve, the range of
jobs that can be offshored continues to grow, often
expanding into areas that only a few years earlier
were deemed bsafe.Q
M. Stack, R. Downing
There are a number of interesting parallels
between legal and healthcare professionals. For
example, in both of these industries, physicians and
lawyers must be certified by state officials before
they are qualified to practice in a specific juris-
diction. Not many jobs, even within healthcare and
law, have this type of geographic protection. The
regulatory hurdles mandating proximity are being
challenged by new technologies that are beginning
to allow a growing range of health and legal jobs to
be performed by qualified people in other coun-
tries. Therefore, the ability of entrepreneurs to
offshore legal and healthcare jobs will depend in
part on how state and federal regulations evolve in
response to these new opportunities.
In an effort to gain a better understanding of
what types of jobs in specific industries are most
and least at risk from offshoring, we have applied
our framework to two detailed cases (healthcare
and IT) and to three summary examples (journalism,
accounting, and law). The next step is to examine
more jobs in these and other industries. Offshoring
has garnered a great deal of discussion over the past
few years, but we need to move beyond the initial
categorization efforts that labeled some industries
bsafeQ and others bunsafe.Q The model introduced
here offers a mode for evaluating, industry by
industry, which specific jobs are most at risk for
offshoring and why.
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