If you’re a CIO who has sent jobs overseas to meet your own (slashed) budget, outsourcing is a tough sell to your remaining employees – not to mention the politicians who represent them.
You may soon have better news to report, and a better way to defend the outsourcing you’re doing. That’s because it turns out outsourcing doesn’t have to be a race to the bottom with victory going to those who will work for less. Quality, culture fit or even just the need for a second source can be worth more than a dollar or two less in hourly costs. So domestic IT and BPO workers can compete, although it may not be for quite the money they were earning before, and it will take training and agility to deliver the highest-value skills.
Some manufacturing companies have found that the savings from moving work offshore can prove illusory and are moving production back to developed countries. This is important because just as manufacturing saw the benefits of outsourcing before the IT and BPO industries did, it is seeing the full costs (such as managing the offshore, different time zones, maintaining quality) earlier as well. The tide of outsourcing is reversing a bit in manufacturing, and may do so also in IT and business process outsourcing.
Just as manufacturing success drove up living standards and wage competition in China, the same is happening with IT in India. According to Business Today, at least one Indian services provider is hiring thousands of Americans for business process outsourcing jobs because rising wages and a shortage of truly qualified talent is making it harder to do business profitably in its native country. If a country the size of India can run short of qualified people, any other outsourcing destination can also.
And, finally, as the work a company outsources becomes more mission-critical, factors such as quality and vendor diversity carry a real economic weight. As Managing Partner Eric Simonson at the Everest Group says, many customers will pay somewhat more for cultural affinity, specialized skills, language proficiency, or just to not put all their outsourcing eggs in one basket. For example, he says, India will be the center of outsourcing “mass for most organizations, but not necessarily the only place.” There are a number of areas where Latin America might do things India cannot do, or do as well or cost effectively, he says, such as Spanish-language BPO or software development.
It was a theme also made recently by Ankur Prakash, vice president and COO for Tata Consultancy Services, at Nearshore Nexus when he highlighted Latin America specialties such as agile development, work involving sensitive data and research and development.
CIOs can’t claim with a straight face that outsourcing is going away or that labor costs won’t drive many, if not most, of their decisions. But they can honestly tell their employees that outsourcing isn’t always a one-way street and that, with the right skills and the willingness to accept somewhat lower wages, some IT and business process jobs belong in higher-cost, higher-skilled countries.
The good news is that as today’s low-cost, low-skill region becomes higher-cost and higher-skilled, they become better markets for more developed regions higher up the value chain. That may not be a perfect argument for outsourcing, but it’s better than the “doom and gloom” reporting we’ve seen in recent years. And it reflects the reality that outsourcing isn’t going anywhere soon, nor should it.