India and other Asian countries have been reaping immense benefits since the past decade due to large US and European companies outsourcing or rather off-shoring back-office operations to these nations, which reportedly had a large and growing pool of talented English-speaking youth. The main reason for moving backoffice operations to India and other nations was the immense savings it offered in terms of infrastructure, labor and other expenses.
The only competition to India was China and Korea. But, Chinese and Koreans have a bad accent and can’t speak good English, this resulted in an increasing number of multinational companies coming to India to set up shop and run their operations. One of the negative aspects of this dependency was the growth of ego and pride among Indians that MNCs don’t have any other alternative, resulting in lack of quality in operations and services. This pride will probably be the undoing of Indian youth, if things go the On-shoring way.
A large and growing number of corporates are now realizing that these savings are not worth losing customers due to lack of quality in the back-office services. In the passing time the operational costs are also increasing in these countries and quality remains the same. This has led American companies to come up with a new concept “On Shoring”, which will give them the same savings but also provide the necessary quality and employee commitment.
These companies are moving their processes back to US but not to the Silicon Valley but to smaller towns in upcountry states like Texas, Colorado etc. In a twist on off-shoring that is being increasing dubbed as on-shoring, global technology corporations have been shipping computer work to small-town America, shunning India’s Bangalore and Mumbai.
The Los Angeles-based Northrop picked Corsicana and six other small cities, including Lebanon, Va., and Helena, Mont., as locations for employees who develop software and troubleshoot technical problems for clients hundreds or thousands of miles away. It costs Northrop about 40 percent less to have the work done in Corsicana than in Los Angeles - savings similar to what would be achieved by sending jobs overseas to Bangalore (India).
Thomas Shelman, president of Northrop’s Information Technology Defense Group and pioneer of the company’s on-shoring program said,
We’re getting very high quality and a dedicated workforce.
On-shoring, in fact, is becoming trendy and an growing phenomenon. Several US-based companies have recently closed down operations in India and set up shop in rural US where access to high-speed broadband connections isn’t a problem and real estate prices and wages are phenomenally lower than in large cities.
A case in point is Xpanxion Inc, an Atlanta-based software development conglomerate which relocated its test operations to Kearney, Nebraska, from Pune, India, because the time difference was hampering communications. Computer hardware manufacturer Dell Inc., one of the pioneers in outsourcing to foreign countries, opened a technical support center in Twin Falls, Idaho, after customers complained about overseas workers abysmal English-language skills.
Accenture Ltd., the world’s largest consulting company, which has a large presence in Bangalore, India with several thousand employees is building a document processing center on an Umatilla Indian reservation in Oregon.
Randy Willis, a senior Accenture executive, said that this was due to an increased demand from clients. Willis said,
We’re responding to the tremendous demand among Accenture clients for outsourcing services performed by professionals within the U.S.
Off-shoring has not entirely lost its charm among US companies, at least not yet. A survey of more than 500 large US companies last year by Booz Allen Hamilton found that 60 percent had shipped some work to other countries. Another company, Forrester Research, predicted that about 3 million high-tech jobs would head overseas by 2015.
But, Dan Sernett, a partner in Los Angeles with Ernst & Young, a professional advisory company, said many companies are reassessing off-shoring.
Sernett said,
It’s not a slam-dunk as it was several years ago. They’re looking for alternatives closer to home,
But, small town America is happy with this development. They are seeing the move of white collar jobs to their city as a way to elevate and diversify a local economy that long has been dominated by low-wage, blue-collar work.
It’s not something people are used to seeing around here,
said Kevin Culpepper, a systems engineer and native of nearby Ennis who returned to the Corsicana area to manage the new center after having worked in Dallas.
This on-shoring has set off a growth in other sectors of economy. First being the housing and real estate. Looking at the potential for a new pool of middle-class buyers, developers are considering building 200 homes in Corsicana.
That’s significant for us. We’ve basically been a stagnant economy for a long time,” says Lee McCleary, the town’s economic development director, who goes on to add that Northrop’s presence is prompting other high-tech companies to consider opening offices in town.
On-shoring presents a serious warning to Indian youth and Information Tecnology and Information Technology Enabled Services industry. Indian youth, who are barely able to compete at the global level due to a dumbed down university system, are taking it granted that a job in a call center/ BPO is assured for them but if on-shoring works well disgruntled MNCs may just close shop and move their operations back to US leaving Indian youth high and dry. It is time for Indian youth take this threat seriously and work hard to deliver the quality that is demanded by corporates of they will lose their jobs and livelihood.
