As you outline your IT services sourcing strategies for 2013 and beyond, there are some great takeaways that buyers and providers alike should take into consideration stemming from this article in the Economist. [Not to mention, they give a little plug to our domestic sourcing industry.] Below are a few takeaways and some thoughts on reshoring of IT services to the domestic sourcing space:
- “In a study of job creation in America McKinsey found that workers for high-level IT support in the cheaper parts of the country cost less than in Brazil or eastern Europe and just 24% more than in India.”
- Standard & Poor’s is cited in CIO magazine to say that they used to offshore much of their IT work, but now they want to send it no further than three hours from Manhatten.
- A survey of outsourcing executives by HfS Research in Boston last summer found that America is seen as the world’s most desirable region for expanding IT and business-services centres in the next two years. India now comes second, despite its lower labour costs.
Speaking of lower labor costs, the following chart highlights this dramatic loss of India’s labor arbitrage. Further, if you use US IT salaries from teir 2 and 3 locations (where we locate our development centers), you find that the labor arbitrage is less than 5%.
This chart is definitely something to take into consideration when deciding the future of your IT service needs. With high attrition rates in offshore locations, resources need to be rehired and retrained with each one that turns over. This takes time away from your project efficiency, and TIME IS MONEY. Per the Economist, “In a study of job creation in America McKinsey found that workers for high-level IT support in the cheaper parts of the country cost less than in Brazil or eastern Europe and just 24% more than in India.” When budgets are tight, do you really have the flexibility to risk sending work offshore and spend double the amount of time to get it done as you would with a domestic sourcing partner like Rural Sourcing?
As a matter of fact, we have a case study with one of our clients who experienced just what was outlined above. When looking for other outsourcing options, they came across rural sourcing as a cost-effective alternative and have become one of the biggest advocates for the domestic sourcing industry. They pay us dollar-for-dollar the same per month as they did to an offshore provider, and not only that, but they get double the amount of work done with much rework. Now, that is something to write home about!
Here at Rural Sourcing, we obviously believe in the success of utilization onshore resources instead of or in conjunction with other IT outsourcing options. But we are curious, what are your pains? Have you looked at using a domestic sourcing partner? Are you just starting to explore sourcing strategies? Feel free to comment on this post and let us know! Let’s get the conversation going.