The Satyam Scandal: The Catalyst For Offshore Jobs Returning?

Trust only movement.  Life happens at the level of events, not of words.  Trust movement.  ~Alfred Adler

The bombshell dropped by Satyam chairman Ramalinga Raju is undoubtedly sending another shock wave across the Pacific and directly into U.S. boardrooms (Click Here For Article).  For the second time in less than two months, a major event that has implications for the offshore outsourcing industry has made international headlines.

While no one can exactly predict what affect this will have on the Indian offshore industry, one can probably surmise with some certainty that U.S. executives will begin to take a hard look at their own offshore vendors and strategy.  Just three months ago, Satyam received the Golden Peacock award, given for excellence in corporate governance.  Makes you wonder what changed so dramatically in such a short period of time.

There’s little doubt that this will shine a bright light on other major offshore vendors regardless of the country of origin, and given the rising unemployment in the United States, the timing couldn’t be worse for these companies.  

That being said, the U.S. worker may have just caught a huge break.

What We See In Our Crystal Ball 

As unemployment rises, offshore outsourcing will draw the ire of many in the U.S.  Should the deflationary trend continue for the foreseeable future, many skilled but unemployed workers will be willing to work for considerable less then what they previously earning.  Furthermore, companies located in expensive metropolitan areas will consider utilizing remote workers to fill many of their previously outsourced positions.  This will allow firms to enjoy the benefits of lower cost jurisdictions across the U.S. at prices competitive to what they used to pay offshore vendors.  The employment costs will be offset even more by the tax credits the hiring firm will enjoy (for hiring U.S. workers) courtesy of the Obama administration.  The early adapters of this strategy will have the added advantage of a major PR coup.  Soon, it may seem like a contest to see who can bring the most jobs back home. 

The Homeland Onshore Model Has Already Proven The Point

Our “Homeland Onshore Model” has demonstrated that domestic remote sourcing can work, saving our customers up to 60% over fully burdened FTE costs. The remote model has the extra advantage of being very “Green”, and will do wonders for the life/work balance.

Do You Have A Contingency Plan?

The Homeland Onshore Model is an excellent alternative to Offshore Outsourcing.  In addition, it can be strong part of any contingency plan that calls for repatriating jobs in a hurry.

For more information on the “Homeland Onshore Model” and how it can work for you, please visit www.ITOnshore.com.

Offshore Outsourcing Predictions For 2009

“When our attitude is right, we can see things more clearly. It’s then that we realize that we are all walking on acres and acres of diamonds, right in our own backyard”. – The Moral To The Acres of Diamonds Story

When it comes to offshore outsourcing, we have little doubt that significant changes are coming. Here are some predictions of how things may play out for I.T. offshore outsourcing in 2009.

“U.S.A. First” Will Stage A Comeback

When the offshore trend first started to emerge around 2001, we saw some outrage regarding offshore outsourcing, especially in the I.T. sector. However, given the low unemployment rate and the fact that the 2001 recession was not broad based, that sediment was short lived. In 2009, we are faced with an across the board deep recession, impacting every segment of the economy. It would be naive to think that when faced with 9% to 10% unemployment, the country and it’s leaders will look kindly upon jobs continually streaming overseas, especially when American workers will be willing to work for much less.

The Obama Administration Will Focus On Offshore Outsourcing

It’s highly likely that the Obama administration will be taking a hard look at offshore outsourcing. While it’s doubtful that protectionist policies will be put into place, it is probable that incentives will be implemented which will encourage companies to bring jobs back. To the extent that any tax incentives did exist that supported offshore outsourcing, those will be identified at and probably dismantled.

Companies Will Start Looking At All Offshore Outsourcing Related Costs

Recently, we’ve noticed that our clients have been becoming more aware of the actual costs of having offshore workers. One client told us that he let go of over 20 resources because the vendor was getting too expensive (dollar devaluation). Others have shared with us that they are starting to pay attention to “hidden costs” such as travel expenses, rework, actual blended rates and onshore staff involvement. Executives are also looking at productivity and quality issues.

Global Uncertainty/Instability Will Create A Need For Contingency Planning

The tragic events that occurred in Mumbai in November serve as a not so subtle reminder that many offshore destinations can be dangerous places, and subject to events that we cannot control. Many companies will begin to look at near shore or onshore locations to hedge exposure to unforeseen events. In addition, companies will need to develop contingency plans (probably using onshore resources) in the event that their offshore development centers become inoperable.

As Salaries Stagnate, Many Companies Will Look At Onshore Alternatives

As the Unemployment figures continue to rise throughout 2009, salary growth will slow and in some cases reverse. This will create opportunities for employers to utilize domestic talent at prices not seen since the late 80’s to early 90’s.

Companies Will Take Advantage of Technology to Save Costs.

One way to lower costs will be to utilize talent that lives in lower cost areas throughout the U.S. Deploying remote workers and letting them work from home will not only save significant salary dollars, but also saves a tremendous amount on real estate related overhead costs. Our “Homeland Onshore Model” has demonstrated this can work, saving our customers up to 60% over fully burdened FTE costs. The remote model has the extra advantage of being very “Green”, and will do wonders for the life/work balance.

While 2009 will probably be a very challenging year, it will also create opportunities to get people back to work in a different way. We have acres of diamonds right beneath our feet. It’s time we picked them up and enjoyed them for all their worth.

For more information on the “Homeland Onshore Model” Please visit www.ITOnshore.com.