Posted on 08/04/2012 2:40:59 PM PDT by DeaconBenjamin
Domestic outsourcing or outsourcing locally such as from US to the US is on the rise, according to a recent research report by Forrester analyst Stephanie Moore, who listed five reasons why the trend is accelerating.
"First, clients, who today depend on software to differentiate and grow their businesses, require contextually sophisticated developers who can communicate synchronously, interpret their fuzzy and constantly changing requirements, and build software solutions to meet those requirements. Second, clients require agility and also lightning-fast time-to-market," Ms Moore said in the report.
The report lists oversubscription to India, the top offshore location, resulting in inflated prices, high attrition and declining quality as the third reason. Tighter enforcement of visa regulation and unemployment in the US were the fourth and fifth reasons for the rise in domestic outsourcing, according to the report.
The report quoted a Forrester client using domestic outsourcing as saying productivity and time-to-market was greater with its domestic outsourcer, and although the labour rate was double, the number of people and amount of time needed was lesser.
"Companies that look at their total cost as opposed to their unit costs may realize that domestic outsourcing can be less expensive than offshore outsourcing - especially for application development work," Ms Moore wrote. Productivity gains, lower on-site labour costs, lower client travel and oversight costs, lower staff costs and lower retained staff costs were among the benefits the report listed for outsourcing domestically.
"On-site staff members from offshore vendors are more expensive (averaging from $68 to $100 per hour) than staff in a domestic outsourcing center (averaging from $40 to $60 per hour)," Ms Moore wrote.
In an exclusive e-mail to ET, Ms Moore said there were no legitimate growth numbers yet on the growth of domestic outsourcing because they had not estimated the market size yet but that Forrester would be doing on this soon. "However, it is safe to say that the so-called domestic outsourcing market will grow at least 100% in 2013 over 2012," she said in the e-mail.
Visa rejection was a common client complaint, she added, "One client told me that their visa rejection rates have gone from 20% to 80% during 2012. Another client told me that she has to hire local contractors for onsite staff sometimes because her Tier One Indian vendor cannot get enough visas approved quickly enough."
Another analyst, who requested anonymity, tole ET that while it was true that rural outsourcing rates in US were less expensive and around $ 40, these vendors lacked the same quality and training that Indian offshoring vendors could provide, and they were usually small centres employing few hundreds of people.
"I don't expect offshoring to come down," the analyst said. However, many companies in the US had outsourced much more than they originally intended or anticipated and this was creating demand for newer kinds of jobs for IT within US, he added. He cited the recent General Motors decision to outsource less as an example. General Electric and other US firms were also taking advantage of tax and other benefits given by certain states for creating employment. Most often, the benefits are also a matter of negotiation, he said.
Indian vendors were also taking advantage of the trend to hire more in the US, he said. "Domestic outsourcing should complement, not replace offshore outsourcing. But, it will certainly impact the number of people that clients require to be onsite with them from offshore," Ms Moore agreed, in her e-mail to ET.
"In the near term, the small domestic outsourcing provider will gain since they are the most focused on this market and will not be cannibalizing any offshore revenues. This reminds me of the pureplay Indian vendors in the 1990s -- they were best at delivering and capitalizing on the offshore outsourcing market because vendors like IBM and Accenture did not believe in the model yet," she said.
"I don't expect offshoring to come down," the analyst said. However, many companies in the US had outsourced much more than they originally intended or anticipated and this was creating demand for newer kinds of jobs for IT within US, he added. He cited the recent General Motors decision to outsource less as an example. General Electric and other US firms were also taking advantage of tax and other benefits given by certain states for creating employment. Most often, the benefits are also a matter of negotiation, he said.
Indian vendors were also taking advantage of the trend to hire more in the US, he said. "Domestic outsourcing should complement, not replace offshore outsourcing. But, it will certainly impact the number of people that clients require to be onsite with them from offshore," Ms Moore agreed, in her e-mail to ET.
"In the near term, the small domestic outsourcing provider will gain since they are the most focused on this market and will not be cannibalizing any offshore revenues. This reminds me of the pureplay Indian vendors in the 1990s -- they were best at delivering and capitalizing on the offshore outsourcing market because vendors like IBM and Accenture did not believe in the model yet," she said.
I wish I had time to work on this project! We had a “Desi” that is what they call themselves, a guy named Raj or Rajeev Goyle, run for Congress here, two years ago.
He was falsely accusing his opponent of “outsourcing” -— I went on the web, found out who was contributing, then went on the various law firm websites and high tech company websites and found out of they ADVERTISED their “outsourcing” services.
I then sent my research to all of the area Labor Unions, the Machinists, all the local Media, and posted it over and over again on the Internet.
Nobody really bought into the “outsourcing” attack against Republican Mike Pompeo.
Oh? And now, Rajeev Goyle works for the United Nations OUTSOURCING JOBS!
“First, clients, who today depend on software to differentiate and grow their businesses, require contextually sophisticated developers who can communicate synchronously, interpret their fuzzy and constantly changing requirements, and build software solutions to meet those requirements. Second, clients require agility and also lightning-fast time-to-market,” Ms Moore said in the report.
Shall we play Buzz-Word Bingo?
Having been in the Software Business for some time I can say that this portion of her report: “interpret their fuzzy and constantly changing requirements,” Is probably the biggest cost multiplier along with excessive Documentation that is.
If a customer goes into a project with a software developer and ALL requirements are understood before the first line of code is written then they will receive a good to great product within their agreed upon price. If they do like the Government and continually change the design it will end up costing millions and millions of dollars and will probably turn out to be a piece of C*ap.
Scott Adams (Dilbert) has covered every variation of outsourcing that our brain-dead MBAs could ever imagine. Go to his website and search for “outsourcing.”
The only thing not funny about Dilbert is the fact that the pointy head boss and the higher ups cannot even come close to the idiots in charge of most of our companies.
You can't outsource Yankee ingenuity, which is what built your business to begin with.
bump.
I am at the tip of the spear in the outsourcing world. I work in America for an Indian owned company. Many of my American coworkers are lazy pieces of chit. 50 year old tattoo artists, sleepers, former meth heads, biker chicks and so forth. I get so angry when they complain about “India taking our jobs” in one breath, then fall asleep at their desk. I won’t even go into the costs associated with not being able to fire some people because of a so called mental health issue, or because of their race. We get a half inch of snow and 1/4th of the company can’t make it into work. We have 500 pound people in their late 50’s complaining about India taking their jobs. Makes me want to puke.
yeah, well I’m at the base, and I can tell you, indians make adequate drones.
The Indians are vastly overrated in what they can do. There are huge problems in what you expect from them and what can be delivered. The only reason every job in America is not outsourced is because Americans can still do the job better. Describing Indians as drones is not that far off. They often lack the aggression and ingenuity of Americans. They are a very feminized country. But, look closely at the American work force and you’ll see that 25 percent of that force is what makes it happen. A third of the American work force is just a drain on the rest of the country.
don’t know about the ratios — might be worse — but can’t disagree in principal.
You can in fact get Indian guys who are very creative, intelligent, and aggressive. Unfortunately, Microsoft and Google have hired them all for very high salaries.
The regular guys in India are OK to do routine work at a low price. Their is no need to hire mediocre Americans to do ho-hum tasks for $60K when you can get a mediocre Indian guy for $20K.
A company with which I am pretty familiar outsourced much of their clerical work to India, obviously because of $$$$. In little over a year everything was screwed up like a chinese fire drill. Receiveables were waaaay behind and payables were so screwed up that lawsuits were threatened....in spite of visits by US personnel to try to get the “contractors” to do it right.
No matter what was tried or threatened, or what copious promises they received from the contractors, before the US people had boarded their return flight, the Indians had figuratively flipped them the bird and gone back to their old ways.
Bottom line? The work was abruptly and much to the surprise of the “contractors” brought back to the States. The geniuses who outsourced the work in the first place were fired. And the only good part of the story.... the department that was ruined and decimated when the work went to India had to be restaffed and trained, providing a bunch of good jobs once again.
Honestly, I can't understand why the unemployment rate isn't more like 50%. The government schools have done a thorough job of completing their subversive mission.
A lot of the types you describe sound just like the crowd BofA hired to change out all their equipment in SC.
One or two sharp ones but the rest were questionable at best and some outright worthless. The same endless hours of leaving mountains of trash piled up and waiting until very late to test stuff drove me insane.
I am doing a contract help desk job that is questionable at best for a few months. That crowd is rather strange and I will take it day by day. It is at chemical facility and no matter how much the air is conditioned and scented, the base odors still register.
I also work part time at a data mining company branch on weekends. It doesn’t pay very well but it is a great environment. There has been talk of trying to expand the place but who can say.I would like it very much if it would.
Sometimes Dilbert is too close to reality.
I couldn’t agree more about professional fools being in charge and wreaking havoc.
There are customers of ours that demand everything be done by Americans and other customers that allow portions to be done in India. Right know the American level is more expensive and reliable, but my point is if we don’t keep working hard it won’t make a difference. My vitriol is aimed at my fellow Americans that are pieces of chit! I don’t want to hear anymore about the education system and opportunity and all that bull. There is (was) a work ethic in this country second to none. Regardless of your level or pay rate, you did your best. That is changing for the worse. Indians and Arabs approach the job differently than Americans. About 25 percent of Americans will stay and complete an issue or task without getting paid extra. It’s called pride and it’s what made this country great. All that is changing and we are slipping.
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