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U.S. beats India for IT outsourcing innovation and understanding

Stephanie Overby | Sept. 25, 2012
Enterprise IT leaders are interested in sourcing more work in the U.S., but the reality is that they have fewer options stateside than offshore.

In part, it is a "control issue" for some Indian providers, says Fersht. In addition, hiring American workers is a more expensive proposition. "What U.S. enterprises should be telling Indian vendors is, 'We want you to train us to manage you,'" says Fersht. "But that's deemed too expensive and too time consuming [by the provider]."

Fersht decided to compare the attitudes toward and experiences with U.S.-based and offshore outsourcing because onshore outsourcing had become the biggest topic of interest among his clients in recent years. "This survey is come ten years or so on into the offshore outsourcing phenomenon," says Fersht. "Customers are saying we might have save 30 percent in costs but we also might have lost 30 percent in terms of the ability of our IT staff to understand the business."

The Politics of Outsourcing That offshore outsourcing has been a political hot potato in this presidential election year may have had some role in the responses, says Fersht. "Some of this may be related to political movement," he says. "Companies are aware that it looks bad to be seen to move jobs offshore."

But while IT leaders may show an increased interest in sourcing work closer to home, it's unlikely that offshore outsourcing will necessarily decrease or that enterprise IT will bring everything back in-house.

"The most mature buyers have invested years building new capabilities at managing offshore resource [and] turning the clock back means greater risk that managing their current situation," says Fersht. "Most large companies cannot operate their own systems now. They are still mixed and complex and they need help." Fersht predicts that much of the lower-level work that has been offshored in recent years-help desk support, testing, systems maintenance-will remain abroad. But the higher-level work that offshore providers have said they wanted to assume-software development closely aligned to the business, for example-is more likely to be sourced domestically, whether to third parties or in-house.

"We're at a bifurcation point in the outsourcing industry, and the future is cloudy," says Fersht. "Can companies keep up the relentless charge of offshoring? Will Indian providers truly invest in domestic facilities? What effect will the outcome of the election have on outsourcing? I don't think we can answer those questions."

What is clear is it that IT leaders are beginning to think about sourcing differently, says Fersht. "From 2002 to 2008, it was all about getting as much to India as possible," he says. "But we have smarter CIOs coming out of the recession who realize this is a long game. It's not all about offshore outsourcing. It's about building smarter global sourcing strategies."



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