Is I.T.Offshore Outsourcing Really Cheaper?

Recently, it seems there have been an abundance of articles about how I.T. offshore vendors will be receiving more business because of the perceived cost benefit of hiring overseas labor. The underlying conventional wisdom in these articles assumes that offshore outsourcing is always cheaper then U.S. based knowledge workers.

The time has now come to challenge conventional wisdom.

While rates overseas have been rising, U.S. rates have been falling. In addition, more and more I.T. executives are talking about productivity issues (in addition to other hidden costs) when they go overseas. For example, if they cut a U.S. based Java developer, they may have to hire 2 to 3 overseas to get the same output. Combine that with overseas rates ranging from $24/hr to $29/hr, and the labor arbitrage is not nearly as attractive as it once was. And if we’re not saving money, then what’s the point?

As the article “The Battle For U.S. Tech Jobs” illustrates so well, the U.S. based I.T worker is finding ways to compete. Synergroup Systems is proud to have lead the way, providing a cost competitive offshore outsourcing alternative for over 6 years.  If you’d like to know more about our “Homeland Onshore Model” please email us at  inquiry@itonshore.com, or visit our site at:   www.ITOnshore.com.

Are There Domestic Employment Alternatives To Offshore Outsourcing?

Nothing travels faster than light, with the possible exception of bad news, which follows its own rules. ~Douglas Adams …

I must admit, it’s been hard to pick up read the business section the last few weeks.  Day after day, we’re being barraged with news about lay-offs, poor earnings, and irresponsible (or just plain stupid) executive behavior.

Today I came across an article that really helped to me to crystallize my thoughts about how we can keep jobs here without becoming protectionist.  According to an article in InformationWeek  dated February 2, (IBM Offers To Move Laid Off Workers To India) IBM has implemented something called “Program Match”.  Basically it’s a program whereby laid off  U.S. IBM workers can apply for offshore jobs in countries like India, China and Brazil.  Relocation assistance would be provided.  The article goes on to state that if selected, the employees  ”will be paid according to prevailing norms in the countries to which they relocate.”  

The story got me to wondering:  Do U.S. corporations have any responsibility to mitigate the work they send overseas, assuming that U.S. workers are willing to be competitive or flexible?  Given the millions of lay-offs now taking place in this country, isn’t it possible that U.S. workers would be willing to accept less, rather than losing their jobs entirely?

Put another way, Is there a domestic employment alternative to offshore outsourcing? 

When the total cost of ownership for overseas labor is taken into account (Blended rates, travel time, turnover, dollar devaluation, rework additional management oversight etc.) one might be surprised to find out that the U.S. Knowledge worker might be within striking distance of being very competitive.  With that in mind, here are some concepts worth considering before you decide to go overseas:

1. With 10% plus unemployment expected by the end of 2009, extremely motivated, reasonably priced domestic IT  talent is close by and ready to listen.  Many IT professionals are very flexible and in some cases, open to a virtual office employment at reduced compensation levels.
2. Due to the strained economic climate, there may be  numerous dislocations of experienced and talented knowledge workers within the U.S.  Prime examples are the auto industry migration to the South and the financial industry in the Northeast.  What about the collapse of retail over the past year?  Vast layoffs in the retail sector have created pockets of available talent in many areas of the country. These are resource opportunities that can result in large cost savings within a corporate budget.
3. Depending on size and scope of the resource requirement, regional cost effective solutions may only be a virtual office away.   Imagine experienced and talented reduced rate resources that can be occasionally available on-site, while most production is completed on a remote basis.

So rather than displacing, laying off  and under utilizing our nation’s intellectual capital, maybe what we should be doing is asking whether they would be willing to make a few adjustments.  For example, if a company is willing to relocate some one to India, why not relocate them to a lower cost of living area right here in the U.S., and adjust their pay accordingly? Such actions may offer one solution to the accerating unemployment gripping this country while at the same time support potential growth areas in the U.S.  

There is no doubt that these are tough times, and lay-offs and terminations are as unfortunate as they are necessary for a companies survival.  However, there are domestic alternatives to offshore outsourcing.  With a little creativity, we can impact our growing unemployment issue.  Before  making an unconscious leap into the “swirling offshore waters”, consider how a homeshoring alternative such as the “Homeland Onshore Model”  might work for your organization.  You  may be pleasantly surprised at the comparative risk-reward ratio.  

If you have any thoughts on onshore vs. off shore, we’d love to hear your comments. 

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.