Share what you know with millions of people
Focus is the best place to turn what you know into remarkable content
On-shoring: Could the long-awaited US economic recovery end up coming from India and abroad?
Today, a colleague and I were discussing the recent outflow of IT talent from their location and they explained that a major US healthcare provider has recently launched a large “on-shoring” program which is driving up IT talent demand in that area of the country. It appears that this company has determined that the costs associated with reduction in quality and increased complexity of off-shore management outweigh the savings.
As we continued to discuss strategies to retain talent, it occurred to me that this may be just the tip of the iceberg. It’s no secret that outsourced customer care is not working out well for many companies. But in addition there is also what you might call a “silent tsunami” of discontent with IT off-shoring that hasn’t made its way to the surface yet. IT managers and leaders I speak to regularly express strong discontent with the quality of off-shored software development and other IT services. With unemployment so high and economic conditions so fragile, there are many workers in the US who are now willing to work for less than they would have even six months ago. This talent pool could be a gold mine for other companies looking to do the same.
If companies on-shoring end up increasing their competitive edge and driving DOWN costs, I could conceivably see a spike in domestic demand that has a positive ripple effect through the US economy. I’m interested to hear of any similar (or dissimilar) observations and thoughts on this possible trend from the focus community
Events
- Dos and Don'ts of Small Business Marketing May 29 @ 11 am PT
- Lead Nurturing 202: The Next Generation May 31 @ 11 am PT
- The Tricks to Paid Media June 6 @ 11 am PT
- Display Advertising for Brand Awareness June 20 @ 11 am PT
Related Activity
4 Answers
In short, you've hit the nail on the head. On-shoring absolutely is going to be a BIG stimulus for the US recovery - but not yet. On-shoring (or as we've written: re-shoring) is really going to be a 30-year trend; every bit as long as off-shoring lasted. It will drastically help the US, but first we need to see the government pushing deregulation and business-friendly tax policy.
Remember also that when the developed world began outsourcing to BRIC nations, those countries were fairly undeveloped. After decades of producing for export, they are now developing middle classes of their own that want all the luxuries they've been building and shipping. In a short time, everything produced in those countries will be consumed there; the US will have to make what it wants to consume.
I've witnessed second-hand as my wife's company is experiencing issues with training and then quickly losing the IT talent they're using offshore to other multi-national organizations. It's entirely likely that these IT jobs will return to the US as productivity and customer satisfaction has not created the desired savings or other tangible benefits to justify the initial effort to offshore these positions.
Having said that, I believe it will be a slow and steady trend as opposed to a wave of re-shoring IT positions and those new positions in the US may not pay quite as much as they used to since it's an employers' market.
I beg to differ on this for the following reasons:
1. Long term contracts have already been signed by many bigger corporates and they cannot get out of it easily without some financial issues.
2. Companies here know that US economy will come back and the local salaries will again go up.
3. The burden of finishing the contract is mostly on the offshoring partner. Companies offshore are also coming out with contracts between themselves to not hire people from eachother. I know this is happening in India for sure.
4. The money to be saved is "still" too high considering the disparity between what gets paid in US versus offshore. It is more cumbersome, problematic and all of those things, but its still worth it for the corporates to offshore work in terms of dollars being saved.
5. US is no longer the primary market (or the only main market), so the offshore teams are being reused to provide for either local markets too or regional markets as well.
6. US will remain a free market economy for foreseable future.
From an IT consultant's perspective I have seen the offshore nightmare first hand many times...but "domestic onshoring" may need some major cleaning. At several publicly traded companies onshoring Indian consultants has caused more budget overruns, delays, and poor decisions than nearly anything else in IT. Take SharePoint for instance: at a major US Solar company (not Solyndra) hired a SharePoint Architect with presumably several years of experience and excellent references. However, after a failed installation of the SharePoint 2010 instance, a failed migration, no knowledgeable development resources for SharePoint, and several related mishaps, management decided to "onshore domestic talent" and brought my company in to find out what was going on. After my team interviewed management and the Architect, it was determined that neither party knew anything about SharePoint 2010...even after 6 months of delays. The Architect's first design was a single server solution that was to serve 5000+ employees with heavy demands on the product...and he didn't know why there were latency issues or why the server load was constantly at 100% or why the hard drives were replaced twice in 6 months, or why specific services were turned off or on. Further, the Architect had created a buddy network of developers that had no experience and brought them in to the company via a "friend's" offshore "onshoring" company. The developers were fair to moderate at developing straight .Net solutions but did not have a clue about SharePoint development and 'using SPWeb/SPSite' memory leak prevention (a basic SharePoint development Best Practice). This decision to bring in so many H1Bs forced out the American talent that only needed SharePoint development training, but it drained the knowledge from the company on how other related systems worked and were accessed. Further, he approved the hire of a fresh out of college SharePoint Administrator with no prior experience. The Admin was a Natural Born US Citizen, but naive and inexperienced. Why would the Architect approve the candidate? Our best guess was that the Architect could not be discovered as a shill if he hired candidates that were inexperienced or from his friend's company that were afraid of being fired and having their Visa closed. Millions of dollars wasted. Months of setbacks. Was it worth it?
Only because management did finally get sick of the delays and costs did they finally seek help. The solution was literally to go back to square one. There was little to no formal documentation. The Architect did such a poor job of explaining features, functionality, and decisions to the stakeholders that they were unaware (or forgot) of the core reasons they needed to upgrade in the first place.
It may seem like a good idea at the time to bring in Diversity...but I know first hand that there are many US SharePoint Architects and Developers...they just cost $20,000 more per year...
Answer This Question