Process Automation or Offshoring: Either Way, You Lose Jobs

Ann All

My 75-year-old father will probably never stop working. He "retired" several years ago, but it never took. His current job involves driving checks and other documents to bank branches across central Indiana. Some years ago, when Congress passed the Check 21 Act, which allows digital copies of checks to be substituted for paper originals and thus cuts down the manual aspects of check processing, I worried his job might be eliminated. (I think my stepmother worried too, envisioning lots of hours of him looking for stuff to do around the house.)

 

My dad is part of a broader trend. While lots of people get worked up about offshoring, automation will likely eliminate just as many jobs, a point I made yesterday in a post about cloud computing's impact on IT jobs. I cited an interview on globalization with The Hackett Group's Erik Dorr and Michel Janssen, in which Dorr told me "the biggest competitor to globalization is automation." He elaborated:

So if you have a process that is highly automatable, then there may not be enough work left to cost-effectively ship offshore. If you go through a list of industries, you will definitely find some that are so inherently structured and repeatable, that 95 percent automation is the ticket. That'll make the whole globalization question a moot point.

Of course, as Dorr explained, automation is capital intensive and offshoring is labor intensive. So rather than making the up-front investment in automation, some companies send work offshore. But with the allure of labor arbitrage diminishing and as the economy recovers, more companies will likely invest in automation to streamline processes and boost efficiencies.

 

Don't believe me or Dorr? Maybe you'll buy it when it comes from S. Gopalakrishnan, the CEO of Indian outsourcing giant Infosys, who shared the same concern about automation's impact on jobs, jobs that were previously offshored to India, with New York Times blogger Vikas Bajaj. Though the trend could take 20 to 30 years, Gopalakrishnan believes advanced automation eventually will eliminate many of the labor-intensive, back-office functions now being performed in India and other lower-cost countries.

 

He offered an example in which automation-driven process improvements allowed Infosys to eliminate two-thirds of a 300-person group assigned to enter orders into an electronic processing system for a customer. A combination of increased customer self-service and consolidation of previously disparate computer systems reduced the need for workers.

 


Another example mentioned by Gopalakrishnan involves the U.S. shift in media delivery, from print to electronic. While some new media jobs will be generated, they won't offset all the others that will be lost. When you think about how newspapers, magazines and other publications are produced and delivered, it seems almost laughably archaic in an era when the same information can be made available via the Internet.

 

Seriously, you use huge and expensive machines manned by costly union labor to produce unwieldy print editions, then pay to have all those physical copies prepared, sorted and delivered by fleets of people in vehicles. It might be more "romantic" or "colorful" than simply doing a series of electronic hand-offs and posting content online, but it sure as heck isn't as efficient.

 

Gopalakrishnan's take:

As a computer professional, it doesn't concern me. But as a CEO and a business leader, it does concern me because we as human beings adapt to change very slowly, and technology seems to be accelerating in its evolution and change.


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Nov 5, 2009 7:31 AM R. Lawson R. Lawson  says:

We are way too productive.  We either need to create more work, or we need to be less productive.  Or we could do both.  Sounds strange saying that, but those are the facts.  Our nation has been hell-bent on sending more and more work offshore, leaving many people without jobs.

Currently, our trade laws encourage production to go offshore.  Currency manipulation gives some of our trading partners a competitive advantage.  Corporations actually get tax breaks for leaving money overseas.  We need to be more PROTECTIONIST - yes I said it.  And yes people are going to use fear tactics to scare you away from this.  But protectionism creates jobs at home.  China is very protectionist, and the Chinese are lucky to get a Sunday off.  They have more work than they can handle.

So option 1 is for us to balance the trade deficit, resulting in foreign goods being more expensive and creating opportunities for domestic manufacturing.

Option 2 is for us to work less.  Stop exempting employees from overtime pay.  This will drive up the cost of labor, since it's expensive to pay overtime.  Companies will hire more workers.  Another idea is to pass laws requiring 4 weeks of vacation like the Europeans do.  That will make us less productive, and stimulate tourism.

I think we should do both option 1 and option 2.  Don't be overly protectionist, but strive for balanced trade.  Impose tarriffs on countries that manipulate their currency to offset their advantage.  Start paying overtime and have 20 days of paid vacation a year, minimum.

You can expect inflation, but that's going to happen anyways because of current government stimulus actions. 

And since I'm already going to be called a protectionist, possibly socialist, here goes my shot at xenophobe.  Obviously we have more people available to work than jobs.  It makes no sense to import foreign workers given all this productivity we are experiencing.  If you want to increase the demand for American workers, stop fiddling with the supply by augmenting the workforce with foreign workers (on the H-1b or L1 visa programs).

My work here is done.

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Apr 8, 2010 5:00 AM Dieter M. Pizarro Dieter M. Pizarro  says: in response to R. Lawson

The problem isn't technology or outsourcing. It's society in whole. Technology is advancing so rapidly we can't keep up. On the other hand society has remained stagnant. Let's face it, in about 50 years they will be twice as many people than they are jobs, may be more. As a society we have to keep up with technology, by changing our society from a monetary based system to resource based system. If we don't change anarchy, war, crime, poverty, hunger, you name it, will become an epidemic. We can't turn back the clock, we are to advanced as far as technology is concerned, but our society is run by outdated laws from the 18th century, that doesn't work any more. It's time to advance society, so we can keep up with technology. To learn more goto TheVenusProject.com and TheZeitgeistMovement.com

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May 17, 2010 11:35 AM philippine call center philippine call center  says: in response to Dieter M. Pizarro

You have a point there. The past decade has witnessed radical changes and advancements in the communications technologies that surely affect the way we live. These changes have given us both advantages and disadvantages.

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