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Outsourcing has come of age. And its newest extension--offshoring--isn't far behind. Professionals involved in the transferring of projects to outsourcing and offshoring partners now have their own associations. The Outsourcing Institute, Jericho, New York, claims to be the largest outsourcing community of buyers, sellers, and influencers in the United States and reports that its members who joined in 2005 are planning more than $24 billion in outsourcing contracts for this year.

For associations and their members alike, outsourcing of noncore functions continues to provide process efficiencies, enhanced service, and customer benefits. And as the world becomes our oyster--or, some would say, albatross--the offshoring of jobs and work projects to capitalize on cheaper labor costs has accelerated. All this movement has created a musical-chairs environment when it comes to people and projects. And few associations remain unruffled by all the disruption. So what are associations doing to support members who fear for their jobs or are otherwise tasked with offloading people and projects? It depends on whom you talk to.

Helping Members Find the Right Outsourcing Partners

Banks are no different than associations when it comes to outsourcing noncore functions. "Naturally, the core business of banking is lending and deposits; that's what our members stay in," says John Hall, assistant director for public relations, American Bankers Association, Washington, DC. "Everything else, from online banking to data processing, is a candidate for an outside company."

But who best to outsource to? That's where the ABA, the largest banking trade association in the country, steps in. The organization convenes focus groups at ABA meetings and gathers other input to determine what services members are most interested in outsourcing. ABA's for-profit subsidiary, the Corporation for American Banking (CAB), Washington, DC, then identifies qualified companies able to provide the services necessary for banks to compete, remain in compliance, and so forth. At no cost to members, CAB hires a consultant to help conduct a thorough due-diligence process.

Companies cannot simply show up at ABA's doorstep and secure its seal of approval. "Many companies say that they can offer solutions," says Hall. "But it's our members we listen to. Bankers, particularly from community and regional banks, come to us with a problem that needs to be solved, and CAB does the due diligence to determine which companies are best qualified to provide the solution.

CAB's due diligence includes such criteria as technical and industry expertise, efficiency of operations and controls, and the long-term ability to capitalize the business. Once a company qualifies for the ABA endorsement, negotiations take place to determine how CAB will assist in marketing the particular service or program, how potential revenues may be shared, and so forth. Banks then have the option of contracting directly with the endorsed company for agreed-upon fees for particular services.

The most recently outsourced service is prepaid payment cards for gifts and travel, "which can be sold in the bank lobby," says Hall. And coming up next up are compliance- and fraud-related solutions.

Bottom line: "Keep it member driven," says Hall. "Our support for outsourcing is truly managed by our members."

Training Members to Manage Outsourcing

Human resource management is at the nucleus of the outsourcing story. PriceWaterhouseCoopers' "Trendsetter Barometer" found, through interviews with CEOs of 360 privately held companies identified as being among the fastest growing in the United States, that 83 percent are outsourcing HR functions and plan to continue. "Outsourcing HR functions has grown dramatically with the need to keep up with frequent changes in state and federal regulations and other compliance issues," says Duncan Harwood, principal with PricewaterhouseCoopers' resource-services practice.

The outsourcing of HR has spawned an industry magazine--HRO Today (www.hrotoday.com) --the Human Resources Outsourcing Association, Washington, DC; and a growing number of firms that hire, train, evaluate, and administer the benefits of employees at a variety of organizations.

To inform its members of the latest in outsourcing challenges, the Society of Human Resource Management, Alexandria, Virginia, devoted a chunk of its March issue of HR Magazine to a special report on outsourcing plus related online member-only content. The message to SHRM members: HR professionals must properly oversee the entire outsourcing process--from preselection preparation to vendor selection to managing the relationship with the outsourcing provider. (For advice on the latter, see "Outsmarting the Outsourcing Process.")

The Northeast Human Resources Association, Wellesley, Massachusetts, conducted its own survey in mid-March to track the impact on its 3,800 members (who work for both for-profit and nonprofit organizations) of outsourcing and offshoring. The survey, according to David Kimmelman, cochair of NEHRA's Outsourcing Special Interest Group and vice president of development and alliances, Human Capital Institute, Washington, DC, made clear that "HR professionals will need to play a much more strategic role in the planning and implementation of outsourcing programs."

To prepare members for such a responsibility, Executive Director Joan Bowen says that NEHRA is developing a special interest group focused on the outsourcing issue. "Our initial polling indicated that not many members were willing to invest substantial time in this," admits Bowen, "but our survey results are showing that these kinds of educational venues are necessary if HR is to play a strategic role in outsourcing issues."

Fear of job loss is clearly an issue that needs attention, particularly since it can lead to poor staff retention, notes Bowen. Consequently, NEHRA's program-planning committee has on its screen sessions that instruct members on effective workplace communication--not only to calm fears about job loss but to foster effective working relationships between a central office and an external service provider whether local or international.

Bottom line: Help members understand how to manage the outsourcing process and to keep communication lines open to employees whose jobs may be affected.

Operating in the Global Marketplace

Gathering and analyzing official data about the extent of offshoring and its impact on the U.S. economy and its workers has proven to be difficult and the results contradictory.

Positive impact means shoring up worker shortages. The news from some studies is positive for American workers and the associations that support them. For example, "Report 2005: A Record Year for Outsourcing," published in January 2006 by Optimize magazine, notes that "Not all work that is outsourced is bound for foreign shores. The vast majority is still performed domestically, despite popular perceptions. In fact, outsourcers are beefing up their workforces in the United States."

And Robert Laurence, interim president, Information Technology Association of America, Arlington, Virginia, reports that for ITAA's member companies there's actually a domestic-labor shortage. An ITAA-sponsored study, The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry, predicts that the savings and other benefits realized through offshoring IT software and service jobs will result in the net creation of 317,387 new jobs in the United States by 2008. "ITAA's mission," says Laurence, "is to assist in the growth and development of the IT industry, making a bigger pie for everyone. And our members expect us to stand for the basics of the American economy: free, fair, and open competition. So, part of our role has been to advocate for an increase in the number of H1-B visas [currently capped at 65,000] and other temporary visas as well as for increased federal support to college students pursuing science, technology, engineering, and mathematics degrees."

John Tortorici, president, Software Association of Oregon, Portland, has similar worries. "Last year," he says, "the United States graduated 70,000 engineers, while India graduated 180,000 and China 300,000. We think that's the biggest threat to our industry and to the U.S. ability to compete worldwide." To counter the threat, SAO has been educating teachers on how better to teach engineering and science in the classroom and working to raise the awareness of young people that these opportunities are out there and that they are attractive.

Tortorici admits that the IT worker shortage in his geographic area may be an anomaly. After all, he says, "it's definitely true that large numbers of programming projects are going overseas. But some of these projects are coming back because you absolutely do better development in a cross-functional team when you bring people together in the same room and let them hash out the issues rather than sending over written explanations that may have translation problems and different views from other cultures."

When jobs evaporate, education is key. Chris Brantley, managing director of IEEE-USA, Washington, DC, (an organizational unit of the transnational Institute of Electrical and Electronics Engineers, Inc., Piscataway, New Jersey), has been looking at less encouraging numbers. According to the U.S. Department of Commerce, American high-tech firms shed 560,000 jobs between 2001 and 2003. Brantley suggests that "the historically high unemployment rates that occurred in the high-tech sector during that time can be attributed to fallout from the dot-com bust, the rise in outsourcing as corporations streamlined their operations, displacements resulting from offshoring, and the overall state of the economy." And while the economy has perked up somewhat since then, Brantley says that for the last four or five years, "we've seen a pretty steady annual decline in IEEE's U.S. membership of between one and two percent each year." In IEEE-USA's 2004 survey of self-identified unemployed members who pay reduced dues, 22 percent of respondents indicated that they were unemployed due to outsourcing, with 15 percent specifying that their job losses were due to increased offshore outsourcing.

While declining membership can be affected by other trends (for example, people are too busy to be involved with associations or fail to perceive member value), Brantley says "the conundrum is that even if they don't realize it, our members need help more than ever because of the changes that globalization is bringing to engineering and other service industries."

"Our challenge," says Brantley, "is to educate our members so that they understand the real implications of offshoring and what they need to do to remain competitive in the job environment that we have here in the United States and that we are going to have in the foreseeable future. How do they compete in the global environment?

"What we see as a missing piece," Brantley continues, "is a stronger focus on innovation and entrepreneurship. Being willing and able to adapt to constantly changing work challenges and environments is critical." To move members in the right direction, "We've unveiled an entrepreneur's village, which is still getting off the ground," says Brantley. It's a virtual community where practicing entrepreneurs can mentor would-be entrepreneurs.

Bottom line: Be flexible and open-minded. The continually evolving global workforce will require constant monitoring and nimble responses to new developments.

Adapting to Other Realities

The global ebb and flow of jobs will continue to create challenges and opportunities for associations and their members. For example, IEEE, which participates in the accreditation of U.S. universities in the institute's fields of interest, sees promise, says Matt Loeb, IEEE staff director of corporate strategy and communications, "in the notion of accrediting academic programs overseas to bring a level playing field to the education of technology professionals. Through initiatives such as these, IEEE is working to enable technical professionals to distinguish themselves in a globally competitive environment."

Software Association of Oregon's Tortorici seems to have a positive outlook: "While there certainly is significant work being done overseas, we also operate from the angle that the glass is half full. Prophets of doom and gloom really affect people. So, if you are telling kids, for example, that all technology and engineering jobs are going overseas, they will avoid these professions because they are fearful that the jobs will go away. And if they do not receive the proper training, the jobs will go away. It's all a matter of perspective."

Carole Schweitzer is executive editor of Associations Now. E-mail: cschweitzer@asaecenter.org

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More Articles From Associations Now, May 2006

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  Taking the Measure of Your Magazine

  Daring To Be Remarkable

  Working Without a Net

  How to Raise $25 Million

  The Good News About Getting Framed

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