Out of Control Policy Blog

Another blow to outsourcing

And it's actually not from some politician sucking up to popular fears for votes. This time it's market driven.

Russell Roberts points to this article that suggests offshore outsourcing can be more trouble than it's worth:

[M]any American companies are discovering that sending work to low-wage countries is not as easy or as inexpensive as advertised. In hotspots like Bangalore, wages and real-estate prices are soaring to record levels–though still generally a fraction of U.S. costs–which cuts into potential savings.

As U.S. companies move from exporting call centers to outsourcing more complex work like software development, they're finding overseas workers are often ill-equipped to deliver consistent, quality work. The bad experiences are creating a boomerang effect–the return of jobs to the United States–which some have dubbed "onshoring."

"Reverse-sourcing" or "unsourcing" may be more appropriate. I think "onshoring" is generally used not as a reversal of jobs going from the US to foreign lands, but for when foreign companies decide to set up shop on American soil.

Apparently, some businesses are floating the term "rightshoring," which is supposed to be gentler than "offshoring." That sounds about as lame as their earlier euphemism, "worldwide sourcing."

But the bigger issue is that the market may decide that offshore outsourcing isn't worth all the hassle. I suspect that it will be like a lot of trends: there's a period of excitement where everyone thinks it's the thing to do, and then the excitement subsides and companies turn to it on a situational basis. Unshoring also shows that companies value more than just low costs–they also want a skilled labor force that can deliver consistent, quality work. Of course, this an obvious point, but it's one that can get lost in all the outsourcing hubbub, where the focus is so often on cost.

Ted Balaker is Producer


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