Thursday, January 3, 2008

Five Offshore Outsourcing Predictions For 2008


Plenty of change lies ahead in the area of offshore outsourcing, which has evolved from a little-used practice to a mature industry in less than 10 years. Here are five predictions for offshore outsourcing in 2008:

1) Businesses that use offshore outsourcing will devote more time and effort to ensuring the success of such projects. Occasional problems with bad software code, miscommunications, and high staff turnover haven't been enough to turn companies away en masse from offshore outsourcing -- many are too hooked on the personnel cost savings -- but they've been enough to demand greater oversight on offshore deals. This also will have some companies working in closer partnership with their offshore providers.

2) More offshore work will go to Latin America, China, Eastern Europe, and other low-cost locations as India struggles to deal with its tightening IT talent pool. Service providers in India say they're working hard on the problem, going as far as to retrain science graduates to become technologists and scouring the rural regions of India for talent. But these measures smack of desperation, and India's talent problem isn't going away anytime soon.

3) India IT salaries will continue their annual double-digit increases, rising perhaps even higher than the 15% range suggested by Indian service providers, but not so much that U.S. companies won't continue to be attracted by the cost savings/skill level combo offered by Indian technologists.

4) India will decline as a location for telephone call center jobs for U.S.-based companies. People are impatient by nature, and even more so when on the phone with a customer service rep talking about a bill they owe or a problematic product they've purchased. Add even a slight language barrier, and you've got customers demanding to speak to managers and e-mailing complaints. Meanwhile, turnover rates for call center reps serving customers during U.S. daylight hours are high in India, since they're night-time jobs there. Even high-level execs at India offshore firms have admitted to me that call center work is an increasingly unattractive business. Look for U.S. companies to bulk up call center staffs in rural, low-cost areas of the U.S. where labor is cheap, and in Canada, for their English-speaking customers.

5) If the economy tanks in the next year, offshore outsourcing will suddenly become a much more interesting topic on the U.S. presidential campaign trail. The U.S. unemployment rate for IT is still very healthy right now, about 2%, and most Web-based development skills are in high demand. But if a recession hits, layoffs may follow, and presidential candidates will be forced to be more definitive on the topic than they've been to date.

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