October 24, 2007

Offshoring Meets "Onshoring" in the Quest for Cheap Labor

Some major American companies like Northrop Grumman and IBM are finding they can save money by keeping their IT and customer service operations in the U.S. rather than moving them to India — a trend some experts have dubbed “onshoring,” reports the Los Angeles Times.

Increasingly, companies are setting up shop in small-town America and training the local workforce — saving money for companies operating out of Silicon Valley or Los Angeles.

Even Wipro Technologies, a software maker based in India, is establishing a center in Atlanta that will employ 100 people.

Customer demand is also driving the trend — IBM opened a technical support center in Twin Falls, Idaho, after complaints about the language skills of employees in India.

The onshoring trend has also been driven by India’s booming economy, which is making it hard for all but the largest U.S. high-tech firms to do business there, according to the Economic Times of India.

“Wage inflation, high workforce attrition, paucity of talent and increased operational costs” are some of the reasons attributed for the shifting market.

The newspaper also notes that since January, the Indian rupee has gained more than 11 percent against the U.S. dollar, making it less cost-effective to set up a small or medium-sized operation in India.

Even as it becomes too expensive for some American companies to outsource to India, Indian companies — that also face stiff competition from China — have in turn started offshoring their call centers and IT departments to other, more affordable nations.

The Guardian notes that multinational banks are now paying Indian companies to ship outsource to countries like Poland, Brazil and Saudi Arabia, where workers speak multiple languages and fill a growing “anytime, anywhere” niche.

Infosys, a multinational IT firm based in India, is hiring 32,000 people around the world just this year, and recruits directly from U.S. and British college campuses.

In many U.S. sectors, meanwhile, outsourcing continues unabated.

A recent survey of 500 large U.S. companies indicated that 60 percent had outsourced some work abroad.

Experts predict that around three million high-tech jobs will have gone overseas by 2015.

Sources:

“Some firms replace offshoring with onshoring”
Los Angeles Times, October 21, 2007

“Will jobs move back to US from India?”
The Economic Times (India), October 20, 2007

“Firms re-exporting jobs to West as wages shoot up”
Guardian (U.K.), October 14, 2007

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