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Thursday, March 24, 2005

A Brief Perspective On Offshore Outsourcing & American IT Service Enterprises

A brief piece on the topic of offshoring written by me has been published at Sandhill. While not covering all dimensions of offshoring, have tried to cover a few key factors. Excerpts with edits:

Every form of digital data – creation,transformation and reporting is up for grabs in the offshoring world. But as Daniel Drezner points out,"Close to 90 percent of jobs in the United States require geographic proximity. Such jobs include everything from retail and restaurants to marketing and personal care - services that have to be produced and consumed locally, so outsourcing them overseas is not an option". There is also no evidence that jobs in the high-value-added sector are migrating overseas. The parts of production that are more complex, interactive, or innovative - including, but not limited to, marketing, research, and development - are much more difficult to shift abroad.Outsourcing would affect less than 2 percent of employed Americans. I refer to Paul Strassman’s views that there is no direct evidence to support the frequent predictions that U.S. firms will tend to outsource in order to increase profits and thus eventually leave America with a "hollow" economy.

Who will win the offshore race? The US IT services firms are under tremendous pressure from their customers to demonstrate better value for money focing them to be provide delivery from global centers. The legacies between India headquartered enterprises and traditional IT services companies are different- It’s the Southwest Airlines Vs United Airlines legacy difference. Having talented employees trained to deliver services is not enough. Leading offshore service providers have developed tools, methodologies, processes, and the management expertise for providing services to clients across geographies. India headquartered vendors think of focus on speed, imagination, and excellence in execution as a sustainable competitive differentiator. The already established western service providers often tout domian knowledge and well entrenched relationships as their edge –Empirical evidence suggests that this is not an exactly inimitable edge. If you find this abstraction interesting -please do visit sandhill.com and read the full piece.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"