Offshoring not to Blame for Increasing Job Losses in Pharma in the US

ValueNotes Sourcing Practice
Posted: 02/29/2012
The US economy has been experiencing one of the severest job crunches in the last decade. While several top bracket, high paying jobs are getting the axe, several jobs lower down the value chain are fast becoming redundant and there is an increasing trend among job aspirants towards updating themselves, going the freelance way or retooling skill sets.

Advancement of technology to replace low skilled jobs as well as productivity improvement to remove the fluff has been driving job displacements. Offshoring has actually been a marginal driver for the increasing job losses in the US. As a matter of fact, job losses in the US over the last 3 to 4 years have not exactly resulted in a comparable offshore job creation.
 
 
 
ValueNotes has been tracking various segments and sub-segments within the outsourcing and offshoring industry. Amongst these, offshoring in the medical transcription and publishing industry, to an extent has led to redundancies in the US. Several of the commoditized jobs in these two segments has been negatively impacted as a result of offshoring.
 
We have looked at US employment potential and job data (Source: BLS) for the three segments - Medical Transcription, Prepress and Desktop publishing to evaluate the current scenario and future possibilities. The following exhibit analyzes employment data / projections within these segments.
 
Offshored Services and Growth
Pre-press: While the global publishing industry is expected to grow at an even pace, most of the growth will be driven by the web/online publishing as well as growth in literacy in emerging markets. Therefore the low-value, manpower-intensive jobs in this segment in the US is expected to dwindle quite fast. The newspaper industry in the US is under severe pressure making the prepress technicians redundant. However, not all of the recent job losses in this sector have been replaced by offshore manpower.
 
Desktop Publishing: India as a destination for offshoring composition work has grown tremendously in the last decade, not to mention the advent of better technology and software innovation. There is limited growth expected within the US for these professions, as indicated by the data in the exhibit above. However, even growth within offshoring is expected to be relatively low compared to what existed three years ago.
 
Medical Transcription: Several Indian as well as Filipino service providers have been handling offshore medical transcription for a long time and yet there exists huge potential within the US. The low-value opportunity in the publishing industry has been adequately tapped and needs to move to the next level.
Comparison of the offshore billing rates show that average per hour rate for medical transcription is much lower than composition (despite median salary for both in the US lie in the same range).
 
This also points to the fact that medical transcription in India suffers the problem of perception. It is perceived as a low-skill (therefore low-value) task for offshoring, while in reality it is not. The skill (education, quality) levels required for a medical transcriptionist in India are far greater than those required for a compositor, which is fairly independent of accents, comprehension, interpretation and knowledge of medical terminology. Early herding of providers in this segment led to rapid price erosion.
 
Going forward, rapid growth is expected in the medical transcription industry in the US. Medical transcription is projected to see 14% growth in employment by 2016, vis-à-vis the dismal growth for publishing-related professions.
 
 
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ValueNotes Sourcing Practice
Posted: 02/29/2012

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