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Outsourcing: Only a Matter of Time?
In past years, a company could save 40%-50%+ (PLUS) by outsourcing IT work to India. Today it is quite different; the savings is 10%-to-20%.
According to Duke University professor, Ariel Lewis, “the benefit of doing business, from a labor-cost point-of-view, in such locales as Bangalore, India, will disappear for some companies in three-to-four years.”
In order to have a full grasp of the situation, one must understand that outsourcing contracts are generally written in U.S. dollars, but much of the cost of Indian service providers is incurred in rupees. What does this mean? It means that the cost incurred by service providers is exceeding the payment given by U. S. companies.
Back in 2007, CIO, a technology publication offered its top 10 predictions for outsourcing in 2008. On the list of top ten predictions for the upcoming year was “flight from big cities.” What did this mean? Simply put, it meant that more and more companies would begin to look for service providers outside of the mainstream (India, China, etc.). The new wave of outsourcing would begin with a massive exodus from popular outsourcing destinations and a new found settlement in places such as Brazil and Argentina would occur. This prediction was more than accurate.
Outsourcing, the transfer of a company’s non-core, day-to-day activities to an outside service provider is something many companies will have to reconsider. Companies who once chose to outsource customer support and call center functions such as telemarketing, CAD drafting, customer service, market research, designing, web development, and content writing will begin to look at other alternative, maybe even not outsourcing at all.
Necessity is the mother of invention – this saying has never been truer than now. Many companies are beginning to think of new ways to get the job done and save money while they are at it. Surprisingly enough, the answer to their search may be a lot closer to home than they anticipated. In addition to outsourcing work to places such as Brazil and Argentina, many companies are now considering: interns, consultants, part time workers and internal employee promotions which in some cases will still lead to substantial savings in the long run.
In theory, outsourcing has always appeared to be a logical alternative to a companies need to concentrate on core duties. However, in practice, outsourcing has never been a practical or easy solution. The problems with outsourcing are not simply a matter of money, language barriers, time delays, or contractual obligations.
In my own humble opinion, the problem with outsourcing has never been about location, language barriers, or time delays – it will always be about accountability, dependability, and the human touch that every client deserves.
*Did You Know – President elect Obama has suggested that he will readjust the tax code to offer more tax incentives to companies that do not outsource?
