This article in Wall Street Journal Business Technology : The Rise of “Reverse Outsourcing” talks of the increasing trend of reverse outsourcing. Couple of key paras:
"While 82% of businesses surveyed said they were satisfied with “sameshore” outsourcing (the industry has adopted several absurd terms to describe where work is done in the wake of the offshore boom ) only 33% were satisfied with offshore efforts. "
“A lot of folks were comfortable taking the work to India, but it turns out they’re even more comfortable taking the work back,” Wilson tells the Business Technology Blog.
That doesn’t mean businesses will start sending more work to outsourcing companies based in the U.S., however. Instead, the desire to have work performed closer to home, which is largely attributable to the need to communicate with the people doing the work, has led to what Wilson calls “reverse outsourcing” – companies based in India opening up offices in the U.S. "
"One area of outsourcing that seems immune to this trend: infrastructure management. Businesses seem happy to let overseas workers monitor their networks and make sure that tech equipment is processing data at the right speeds. The reason, says Wilson, is that infrastructure management is largely automated, so communication isn’t as big a deal. “It’s low touch,” he says. “There isn’t a lot of interaction.”"
Personally I think there are some more layers to peel here to really get to the core of why enterprises prefer "sameshore" outsourcing than just the stated need for better communication.
While Indian companies (like TCS, Infosys, Wipro, Cognizant, Satyam, HCL) may be opening offices on the "sameshore" this will eventually bring them closer to the traditional in-continent outsourcers (like IBM, EDS-HP, CSC, Accenture, Cap Gemini) in terms of operating model and quality of service. Really the very DNA of these companies. The cost, operating style will gradually tend to be the same since a lof of folks then would be local hires bringing with them the style from those other in-continent companies where they worked earlier.
"While 82% of businesses surveyed said they were satisfied with “sameshore” outsourcing (the industry has adopted several absurd terms to describe where work is done in the wake of the offshore boom ) only 33% were satisfied with offshore efforts. "
“A lot of folks were comfortable taking the work to India, but it turns out they’re even more comfortable taking the work back,” Wilson tells the Business Technology Blog.
That doesn’t mean businesses will start sending more work to outsourcing companies based in the U.S., however. Instead, the desire to have work performed closer to home, which is largely attributable to the need to communicate with the people doing the work, has led to what Wilson calls “reverse outsourcing” – companies based in India opening up offices in the U.S. "
"One area of outsourcing that seems immune to this trend: infrastructure management. Businesses seem happy to let overseas workers monitor their networks and make sure that tech equipment is processing data at the right speeds. The reason, says Wilson, is that infrastructure management is largely automated, so communication isn’t as big a deal. “It’s low touch,” he says. “There isn’t a lot of interaction.”"
Personally I think there are some more layers to peel here to really get to the core of why enterprises prefer "sameshore" outsourcing than just the stated need for better communication.
While Indian companies (like TCS, Infosys, Wipro, Cognizant, Satyam, HCL) may be opening offices on the "sameshore" this will eventually bring them closer to the traditional in-continent outsourcers (like IBM, EDS-HP, CSC, Accenture, Cap Gemini) in terms of operating model and quality of service. Really the very DNA of these companies. The cost, operating style will gradually tend to be the same since a lof of folks then would be local hires bringing with them the style from those other in-continent companies where they worked earlier.
Alternatively, if the Indian companies decide to run the operations with the same style and skills as they run in India, with resources imported from India ( which is not practical) I am sure this will lead to a new category of companies with sameshore operations but still not popular with enterprises outsourcing.
This really is part of the continuing story of IT outsourcing and how it has evolved over the years. The current state of affairs is another section of this story which is bound to evolve with time. Following are four broad phases in which I see this story to have unfolded till now:
- Phase 1: In the first wave of IT outsourcing in US (and little later in Europe) companies outsourced to in-continent outsources. These brought workforce closer culturally to theirs and often it also had staff moving from client's rolls to the outsourcer.
- Phase 2: With the advent of offshore based providers came an army of culturally different teams with little or no representation from the local population in their sales and delivery teams. They still got business ( though new with little past track records as the in-continent outsourcers) as they promised costs almost 50% down. Enterprises were willing to take that even though the teams were not culturally aligned.
- Phase 3: In the next phase a lof IT outsourcing, the in-continent outsourcers noticed the offshore models of newfound competitors and figured out that it was something they could also do - have resources in offshore locations like India, and deliver services from there. It was easier to hire in India with a ready set of trained professionals trained and developed by the traditional offshore based outsourcers from India. So time-to-deliver was not too long and their hired some of the senior folks from these very offshored based outsourcers who knew the tricks of the trade.
- Phase 4: It's time to play catch-up for the offshore based IT outsourcers. They realize now that what they miss is a workforce more local to their customers in-continent along with a more culturally aligned workforce to their customers' teams. Often not stated but understood is also that they realize they have been missing on the golf courses where the client CxOs spend time and often get to strike a discussion with sales reps from the in-continent outsourcers. So, they are doing an encore of Phase3 now in the in-continent outsourcers' turf.
This is great levelling match. End of it, with the principle of equillibrium both types of outsourcers will want to get the competitive advantage of others and soon it will be difficult to distinguish between them in a crowd. It would then be time for some other differentiators to play and offshore as a differentiator will really cease to exist in its current form.
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