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Is Offshoring Losing Its Luster?

The 21 October Los Angeles Times has an article
(free registration required) that tells how some American technology
companies are choosing to keep their technical and service operations
in the United States rather than moving them overseas. In some
instances, American companies that had moved these functions to India a
few years ago are coming back, and one Indian company has found the
U.S. an attractive place to expand.

Much of the motivation is economic–small towns and cities in rural areas can now compete financially with
offshore sites. The article quotes the president of Northrup Grumman’s
Information Technology Defense Group who says his company can find a
"very high quality and a dedicated workforce" in Corsicana, Texas at
about the same cost as sending the work overseas. The company is
opening five other software development and technical support
centers in small cities like Lebanon, Virginia, and Helena, Montana.

Non-economic factors also enter into the companies’ "onshoring" decisions. Many rural areas now have broadband
communications, which they
did not have a few years ago. Xpanxion, an Atlanta, Georgia, software
company, moved its test operations center from India to Kearny,
Nebraska, because the widely different time zones were making
coordination with headquarters difficult. Dell Computer, one of the
more active offshoring companies, moved a technical support
facility to Twin Falls, Idaho, after complaints from customers about the
English language skills of the  overseas staff.

One leading Indian company is even starting a software design center in
the U.S. Wipro Technologies, a software developer headquartered in
Bangalore, plans to open a facility in Atlanta that will employ as
many as 500 programmers. Wipro’s president says, "The work we’re doing
requires more and more knowledge of the customers’ businesses — and
you want local people to do that."

Onshoring may be now trendy, as the article notes, but there will still
be plenty of offshoring. The article cites a survey last year
of 500 large U.S. companies where six in 10 reported sending some work
overseas.  Another study predicted 3 million high-tech American jobs
would move offshore by 2015.

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