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US outsourcing moves to Midwest

US tech companies are looking increasingly towards the domestic market for their outsourcing needs – which president Trump will no doubt love but, sorry Donald, it’s not a matter of principle. It’s because the companies have woken up to the fact that they need to offer better value than their international competition and, frankly, they’re doing a good job of it.

According to a report in Venturebeat, they are aided and abetted by increasing costs in the foreign market. This has been inevitable for some time; as living standards increase in emerging economies the demands for Western-style salaries (or something that makes the first couple of moves towards that sort of income) inevitably increases. This, perhaps ironically, means it’s more difficult to be truly competitive against another Western salary.

The Midwest is the prime beneficiary from all of this. It’s not that there isn’t still a cost differentiation, according to the report (itself referring to a New York Times report which you can find here if you subscribe), it’s just that the decreasing differential means the “wow” factor goes away from the revised price a bit. Tellingly, a client in the Times story confirms that this is the first time his company has been truly happy outsourcing. Politics aside, nobody minds bringing more employment to their own country and that’s what this sort of company makes possible.

Companies such as Infosys are responding by hiring in the US. Wherever this ends up, it looks very likely that rightshoring and offshoring are going to end up as two-way streets before very long.

 

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