Offshoring goes both ways.

There has been a lot of debate in the U.S. about the advantages and disadvantages of offshoring. Proponents say that companies should be able to tap the global talent pool and take advantage of lower production costs in other countries. Opponents claim that offshoring takes jobs away from Americans and allows companies to take advantage or even abuse lower paid workers in other countries. Something that doesn’t get talked about as much here in the U.S. is reverse-offshorting (from a U.S. point of view): foreign companies hiring Americans to work for them remotely.

The NY Times published exceprts from an interview with Henning Kagermannm, CEO of SAP, arguably the largest enterprise software producer in the world. SAP is a German company. Kagermannm talks about how they do about a third of their engineering work offshore, i.e. outside Germany. One of the places where they offshore from is Palo Alto, CA (India, China, and Israel are the other three). The other interesting thing he talks about is how they specialize their offshoring activities depending on the talent pool and capabilities at each location:

Q. How does the global division of labor work? For example, what stays in Germany?

A. If it comes to deep application integration, we go to Germany. It’s where we have many people with deep knowledge of finance, manufacturing, human relations — those kinds of things, and knowledge of those functions in specific industries, the domain specific knowledge. That kind of deep knowledge is essential to platform work, designing the basic architecture of the core product.

Q. How about Silicon Valley?

A. In Palo Alto, we leverage the kind of innovation and creativity that is in Silicon Valley. It’s a place where a lot of new companies and technologies pop up and you can more easily integrate those new things into your thinking and your products. A lot of the Internet work has been done there, the technologies that open our products to others.

Q. And India?

A. India is mixed. But we do a lot of implementation of the design work in India. Our intent was to go there for the large talent pool. But we’ve been in Bangalore for seven years and we’ve grown somewhat gradually there. You cannot go in and hire 2,000 in a year and believe they are going to be ready to develop high-quality integrated software applications.

I think that offshoring can have its own problems but overall, it’s a practice that no company that dares call itself global can avoid. The fact that offshoring happens in and by many countries means that the U.S. shouldn’t be pursuing an isolationist policy of discouragin U.S. companies from offshoring. Instead, it should be competing by providing the best talent in the world, enticing foreign companies to offshore their operations here.

Which of course brings us to education and training which is another huge topic for another time.