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Businesses Realize Reshoring Benefits

According to a recent report in the Economist, Harley-Davidson Motor Company announced the outsourcing of its IT and back-office based jobs to Infosys Technologies Limited. However, the twist is that Infosys is going to serve the motorcycle company from its new office in Milwaukee manned by American employees! India’s trade body for IT sector NASSCOM reports that in January 2013, Indian IT companies working out of the U.S. employed 280,000 local people and were planning recruit more in next few years. The number of locals hired in America have doubled over the past five years, says NASSCOM.

The trend of off-shoring services is slowing down as the work that can be off-shored has already been sent out. Moreover, businesses are choosing to have complex and strategic tasks in IT and business processing to be done locally. This is expected to help reduce the risks associated with outsourcing.

CIO magazine reported last year that credit-rating agency Standard & Poor’s which had outsourced a major part of its IT work earlier, now prefers to send its work to a place that is not more than three hours away from Manhattan.

A McKinsey study on job creation in America demolished the notion that outsourced labor is cheaper. The research revealed that the cost of skilled IT workers in the ‘cheaper parts’ of the U.S. is lower than that in Brazil or Eastern Europe, and only 24% higher than that in India.

Businesses Realize Reshoring Benefits

Flexibility, speed and innovation are cited as major factors fueling the onshoring trend. General Electric and General Motors, two companies with a lot of business process outsourcing experience, are onshoring for such reasons. GE expects it can develop mobile apps for local customers more quickly with an American workforce, while GM is hoping to have 90% of its IT work done inside the firm and at home.

Vendors boasting low cost are trying to bag higher-value jobs such as managing human resources and complex, multi-faceted projects. However, even for this, they need to be geographically close to their clients. When Cognizant took over business processes for the American arm of the Dutch bank ING, the company agreed to new offices in Iowa and North Dakota and employ ING’s existing employees.

Hardest hit by reshoring are call centers. Customers are being put off by artificially put on accents that often fail to accomplish what the speaker wants to convey. This is taking call centers, especially those for banking and financial services, back to the West.

About Rajeev R

Rajeev R

Manages the day-to-day operations of MOS from NY. With an interest in information technology, Rajeev has guided MOS to extensive use of digital technology and the internet that benefits MOS as well as MOS clients.