At first blush, moving core processes like innovation to foreign shores seems like a huge leap. But it's actually a natural next phase of the offshoring movement, says Joe McGrath, CEO of Unisys. "The global arbitrage of labor, the talent available around the world, and the number of engineers graduating in (developing economies) have led us to move functions you wouldn't have expected offshore," he says. "Because of Sarbanes-Oxley, for example, it's hard to get internal auditors in the U.S. So we've sourced all our recent hires in Shanghai. Who would have thought that your core auditing practice would be in Shanghai, Budapest or Hungary? But that's where it is."
Companies are no longer just moving things that are easy to do offshore," says Gary Gereffi, a professor in the Department of Sociology and Markets & Management Studies Program at Duke University. "Microsoft's Beijing R&D Center is doing things with character recognition software that they think are as advanced as anything going on with that issue anywhere in the world. And GE's (research) of environmental issues in China is also unique. As capabilities grow, companies are trying to find places around the world that can tackle global problems in the best possible way."
A confluence of factors is driving this trend. In a world where great ideas are quickly assimilated across global markets, continual innovation is crucial to competitive success. At the same time, the development of ever-more-sophisticated technology is driving an increase in both the cost and complexity of R&D activity for most companies.
Source: Chief Executive, http://www.chiefexecutive.net
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