Daily Archives: March 10, 2018

Is in-sourcing booming…

For many  years, American companies have been saving money by “offshoring” jobs — hiring people in India, Philippines,  China and other distant low cost countries.  Slowly some of these jobs are making its way back into the  United States.

For some of the companies based in US, now the meaning of outsourcing is to keep it here in US than in distance locations and they are happy about it.   Some of the firms in US are  flourishing niche in the tech world as some American companies pull back from the idea of hiring programmers a world away.

Salaries have risen in places like South Asia, making outsourcing there less of a bargain. In addition, as brands pour energy and money into their websites and mobile apps, more of them are deciding that there is value in having developers in the same time zone, or at least on the same continent to enhance their go to market strategy, utilize their subject matter experts here, maximize their onshore investments,  poor performance of their offshore partners, frustration with the whole model  just to name a few.

Many of these domestic outsourcers are private, little-known companies  that are making waves while the behemoths like IBM lone of the country’s foremost champions of the offshore outsourcing model, has announced plans to hire 25,000 more workers in the United States over the next four years. As a result, the growth of offshore software work is slowing, to nearly half the pace of recent years.

The India based pure play firms are feeling the heat while the The nature of work is changing .   Vishal Sikka, chief executive of Infosys, an Indian outsourcing giant. “It is very local. And you often need whole teams locally,” a departure from the offshore formula of having a project manager on-site but the work done abroad.  “It’s not enough to have people offshore in India,” he added. Infosys announced in May that it planned to hire 10,000 workers in the United States over the next two years, starting with centers in Indiana and North Carolina. TCS, WipRo are not lagging behind as well, they have been beefing up local hiring in US.

Research firm IDC estimates yearly growth of 8 percent for offshore services industry. The rate in the previous five years was 15 percent.  Thus domestic sourcing is here to stay, and it’s going to grow rapidly.

The first wave of internet-era digital change in business, starting in the 1990s, focused mainly on automating back-office tasks like payrolls and financial reporting. The software involved was a collection of huge programs maintained by armies of engineers.  The internet allowed that work to be sent to low-wage nations, especially India. That brought the rise of the big outsourcing companies like Tata Consultancy Services, Wipro and Infosys.

Offshore services companies still excel at maintaining the software that runs the essential back-office systems of corporations. But today, companies in every industry need mobile apps and appealing websites, which can be made smarter with data and constantly updated. That software is best created by small, nimble teams, working closely with businesses and customers — not shipped to programmers half a world away.
The headaches of navigating time zones, cultures and language often outweighed the cost savings. Those problems go away with domestic outsourcer.  Hubs in non Technology cities are doing well to tap skilled people who want jobs in the technology economy without leaving the Midwest, where living costs are far less.Every business now realizes it’s a digital business and they need technical help, and that’s really driven the demand for our U.S.-based talent.Politics seem to be playing a role, too. The American onshore companies say they are seeing a post election spike in client inquiries, as President Trump lobbies businesses to create more jobs in the United States and seeks to curb immigrant work visas. The election has brought a lot of attention to these issues in additional to the visa curbs and tightening of the posture on H1Bs specifically.
Rising labor costs abroad also make domestic sourcing more attractive. A decade ago,  an American software developer cost five to seven times as much as an Indian developer. Now, the gap has shrunk to two times.
But the sales pitch made by onshore companies is not about raw labor costs. Instead, they claim the ability to deliver excellent work more efficiently than the offshore providers and less expensively than large technology services companies.  Many US based companies have cut its use of offshore by using providers locally and with some jobs being brought back. For long American industry has relied too much on overseas technology workers and neglected the potential talent here.  With wages stabilizing here and costs rising overseas by a faster clip and technology rapidly changing towards Cloud, AI, RPA etc the time is ripe for this trend to see an uptick.