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Offshoring woes

Link: Is the Offshore Sun Setting? [ Motley Fool Take] June 8, 2005.

According to a survey just out from consulting firm DiamondCluster International (Nasdaq: DTPI), several trends have begun to gain strength, merge, and push back at that famous 2004 election-year bugaboo: offshore outsourcing, or "offshoring." Collecting the results of interviews with more than 450 tech and outsourcing company executives, DiamondCluster's 2005 global IT outsourcing study arrives at some startling suggestions on where the offshoring trend may be heading.
For example, 51% of the executives reported recently terminating an outsourcing relationship. That's partly a result of last year's political climate and partly a response to angry U.S. employees who, unhappy at the prospect of losing their own jobs, are giving their management teams an earful. It's also a response to customer complaints about not being able to understand tech-support personnel from other countries.
But the decline in offshoring is also almost certainly linked to companies' growing unhappiness with their outsourcing partners. Firms reporting "satisfaction" with their partners declined from 79% to 62% over the past year. And for that drop, you have to place a lot of blame on the hype. Offshore promoters have been touting promises of incredible savings from outsourcing -- 50%, 60%, even 80%.

Well, it's also about the law of supply and demand. As more companies do offshoring the cost of offshoring rises while the domestic wages are down, reducing the wage gap.



I read your blog on outsourcing. I have found it quite informative, interested and also helpful in sharing knowledge resources.

Kevin Ballie

How is this affecting the economic booms in India and other outsource hotspots?

I'm concerned on the outsourcing issue as to how America's education system is preparing its students for a future of a more service-based America, with less manufacturing and so forth.


If you pay an American tech $80 an hour to fix something and it takes him half an hour your cost is $40.

If an Indian tech takes four hours to solve the same problem at $20 an hour because neither one of you can fully understand the other, you've paid twice as much for the service and become extremely frustrated in the process.

This happens more often than not in my experience.

This is not to say that Indian tech support is bad. The quality varies widely.


Ashish, I have taken the liberty of book tagging you.

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