Big news out of the corporate headquarters of General Electric this week: The giant conglomerate, which produces everything from jet engines to television sitcoms, announced that it is bringing some jobs back to the United States. IT jobs, no less. Has GE learned the lessons of nearshoring?
GE said it will add more than 15,000 technology jobs in the next three years. The announcement was made by CEO Jeffrey Immelt, who is also known as President Barack Obama's "jobs czar" (head of the President's Council on Jobs and Competitiveness). The corporation has been frequently lambasted for "inventing outsourcing." Its former boss Jack Welch famously once said that it would be ideal if a business could install its factories on barges in order to "move with currencies and changes in the economy."
A good number of these new IT slots will be positioned in Michigan, a former industrial powerhouse that in the month of May lost more than 10,000 jobs. GE said it expects to have approximately 1,100 people working in an IT center outside Detroit. Already 600 people have been hired for the Michigan operation.
About half the IT work that this new group will cover had been assigned to non-GE employees, the company's chief IT officer said. The strategy of distributing work outside the company "may have had its time," she said, but an unwanted consequence was loss of "technical capabilities that we have to own."
So, why the adjustment to IT policy at GE? The company cited tax incentives as one reason to move these jobs back to Michigan.
But there's another reason, and it relates to what proponents of nearshoring have been saying since the dawn of nearshoring: It often makes sense to have your development and production teams located close by. No GE officials, at least from what I've read, said anything explicit about "time zone" or "cultural compatibility." But they have cited proximity. Company officials have acknowledged that being able to respond quickly to technology demands is key to success. Having teams work close to the problem, close to the source of change, is part of what nearshoring is all about.
Talk to a client of a nearshore IT provider and you will probably hear the client say that collaborating is so much easier with someone located nearby. Fred Hochberg, president of the U.S. Export-Import Bank, says the rewards of collaboration are convincing U.S. businesses to bring offshored jobs closer to home.
“People in the business world, small and large, are finding that having your research and design all co-located has enormous benefits,” Hochberg said in an interview. “The manufacturing process informs the engineering process and then the engineering process informs the manufacturing process.”
Enabling the people involved in those processes to work closely — geographically closely — is going to pay off for GE. They'll benefit from all the advantages that nearshore IT providers have been touting for a decade now: genuine collaboration, give-and-take, no late-night phone calls, rapid response, more agility, and a sense of camaraderie. Oh, and the people who get those IT jobs, it's good to see them get some benefits too.
Forgive me if I use the phrase "win-win."
Dennis Barker
