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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications
FIGURE 2-1 Bachelor’s degrees in engineering and computer science, 1983–2004. Source: National Science Foundation/Division of Science Resources Statistics; data from Department of Education/National Center for Education Statistics; Integrated Postsecondary Data System Completions Survey.
THE INSTITUTIONAL AND HISTORICALCONTEXT OF OFFSHORING
The NAE Committee on the Offshoring of Engineering defined “globalization” as the broad, long-standing process whereby national economies and business activities are becoming increasingly integrated and interdependent, mainly through expanded trade, capital flows, and foreign direct investment. “Offshoring” was defined as a more recent phenomenon whereby work is being relocated and diffused across national borders, enabled by advances in communications technology and changes in management practices. A wide range of services work is being offshored, but this workshop and report focus only on engineering.
Ideally, the committee would define offshoring of engineering as engineering work transferred from the United States to other locations, both by outsourcing the work to other organizations and by establishing or expanding subsidiary operations in the offshore destination. In practice, there are several difficulties with this definition. First, based on existing data, it is difficult to track the expansion of overseas jobs and the contraction of U.S.-based jobs in a way that establishes a relationship between them. Second, the expansion in overseas engineering work by firms with extensive U.S. engineering operations is not necessarily accompanied by a corresponding contraction in U.S. engineering activity; in addition, the jobs being created overseas may be qualitatively different from those that might be cut in the United States. Even with much better data, it would be very difficult to tell if offshoring is taking place, as described in the “ideal” definition given above. In the industry-focused papers (Part 2) and elsewhere in the report, expansion of overseas engineering work, both through outsourcing and subsidiaries, is considered evidence of offshoring.
Other factors related to offshoring included in this study are specific business practices (e.g., the international diffusion of corporate research and development [R&D]) that preceded the recent wave of offshoring but have taken new directions since it began, the movement of engineering work as a result of the relocation of manufacturing activities, and “onshoring” (engineering work being moved to the United States from abroad).
One important topic discussed in several of the papers but not a focus of the committee’s summary is the management of offshoring by onshore firms, including effective practices and barriers to success. Clearly, companies in a variety of industries perceive benefits from offshoring. However, it should not be inferred that offshoring is an easy, frictionless process. The Boeing 787 is a recent example of the complications that can arise (Lunsford, 2007). A growing body of literature on the management of offshoring and multinational product-development teams describes barriers to offshoring in an organizational context and ways to overcome them (see, for example, Carmel and Tjia, 2005).
Offshore Sourcing of EngineeringWork: India as an Example
In the context of engineering, the definition of offshoring encompasses several distinct phenomena and business practices that have emerged over the past several decades in particular industries. With rapid changes in technology and markets, these phenomena and business practices, which have somewhat different motivations and destination countries or regions, sometimes overlap and blend into the broader trend of the globalization of innovation.
The business models and infrastructure for a wide range of services offshoring, including business-process offshor-