The Inside Scoop on Offshoring in a Struggling Economy
By Jeff Welsh
When Duke University's sixth annual corporate offshoring study found that the average savings produced by IT offshoring had been in steady decline for five years, we started to wonder how had the economic crisis of the last three years affected the use of offshoring in our region and across the U.S.? Had high unemployment and low consumer confidence been factors—not to mention weak income growth and plummeting home values or the federal debt crisis for that matter—on the prevailing attitudes toward the outsourcing of U.S. jobs?
Throughout this year's 22-question Pulse Survey, IT Outsourcing and Backsourcing: Are IT Jobs Returning to the U.S.?, we found that the financial crisis that changed the world had also changed sourcing strategies. While not a full-fledged trend, a significant number of businesses are indeed backsourcing their IT—i.e., they are returning offshored work to the U.S.
Respondents cited a range of reasons for this, including cost savings that did not materialize and communication and operational efficiency that proved too hard to maintain. The survey also uncovered a widely shared sentiment that we should all do what we can to strengthen IT skills, opportunities and leadership here in the U.S. You can download the full report here.
So, what needs to happen before there is a full-scale return of IT jobs to the U.S.? Respondents widely indicated a need to cultivate a larger world-class pool of U.S.-based IT professionals. Conversely, it was pointed out that opportunities must be created to entice bright young minds to select these IT fields of study at the university level. Of course, for U.S. businesses to create these positions, they need to not only know that the talent supply will be there, but also that it will be affordable. All of which begs the proverbial question—which comes first, the chicken or the egg?
STAR BASE outlines two strategies that, when combined, can curb offshoring, while still providing U.S. businesses a healthy balance between cost-effectiveness and the talent they need.
• Tax Incentives — As an industry, we would do well to lobby for tax incentives designed to encourage businesses to keep work onshore. As one participant bluntly put it, "Anything that would lower the cost of doing business in the U.S." For many IT leaders, this is what it boils down to. While most want to keep work in the U.S., it has to make financial sense—especially during a period when keeping the business profitable and competitive is particularly challenging.
• Educational Support — To better support the development of a bigger and better U.S. IT workforce, we also need to collectively push for educational institutions to step up to the plate. Stronger programs in computer sciences can help with the skills gap that is currently driving IT work offshore. This could include better collaboration between education and business. As one respondent explained it, "Schools and universities need to partner with businesses to better understand the skills needed today."
Whether it's strengthening existing programs or creating new paths for U.S. workers to develop IT skills outside of traditional undergraduate degrees, directing talent into the IT field and supporting them in their educational development is an obvious place to start.
To better understand this important issue, we at STAR BASE encourage you to download the full survey report, and, as always, feel free to contact us directly at 513.245.0400 with any questions.