Science Careers Blog

October 22, 2007

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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