Will the Recession End Offshore Outsourcing?

For BPO Services, the U.S. Is Still in the Game

The issues surrounding client/employee contact still favor onshore services (even though offshore services are improving by the day), and there is still a great supply of mid-level executives who will be anxious to keep their jobs in the forthcoming months. With significant incentives to keep work onshore, I can see the U.S. stepping up as a serious BPO location. Not a bad thing for the BPO industry, as long as the service providers invest wisely in attaining the right onshore/offshore balance within their delivery infrastructures.

Moreover, the onus on sourcing we're going to see from the restructuring financial services industry is going to entail a delicate balance of onshore/offshore BPO work. If the major financial services firms struggle to sell off their Indian captives, we may well see several of them scale-down their offshore dependence and seek onshore services as an alternative.

For IT services, It's Looking a Bit Late to Pull Much of This Back

In India, for example, IT services have become the life-blood of the country's economy, and skills in basic programming are widely available for mainstream applications.

Even if U.S. wage rates for programming work come down significantly, there is also a major issue with the fact that the quality of many IT services delivered from offshore locations is now consistent.

The core battle is with services needed from business-process architects and staff with deep industry-specific expertise. We have seen many of the leading offshore providers invest in their onshore delivery centers over the last year-and we can expect to see continued significant competition between the incumbents and offshore providers in the coming months for onshore-related work.

It's about accepting that we now operate in a global economy and that we are competing at a level where we need to work as hard, and as smart, as the next nation. I hope President-elect Obama can help instill a new work culture in the U.S. The U.S. people want change, and they have voted in a President promising change. The core question now is whether they are really prepared to change.

Phil Fersht is research director of Global Business Services & Outsourcing at AMR Research.