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Obama wants less offshoring, as vendors see U.S. shift

Signs of a turn in the IT services market from offshoring to domestic providers

January 19, 2012 07:03 AM ET

Computerworld - WASHINGTON -- President Barack Obama is trying to encourage U.S. companies not to send work overseas. This might not be as hard a job as it seems for some types of IT work.

A number of vendors believe offshore outsourcing is becoming less attractive and are working to make the most of this shift. Among them is a former CEO of the large IT services firm Keane, Brian Keane, who is setting up a new firm, Ameritas Technologies, to address the domestic IT services market. The Keane firm was recently sold to Japanese-based NTT Data Company.

Keane said his company will be "focusing on jobs that have gone offshore, but should have never gone offshore." Some software applications are strategic to a company and require extensive interaction with users, Keane said. Offshore developers "just don't understand how the application is being used," he said.

Stephanie Moore, an analyst at Forrester, agrees with this view.

"Understanding the context," Moore said, "is almost as important as understanding the technology."

Moore also sees other problems with the offshore development model, especially the increasing wage rates in India and high employee turnover.

Moore, who was at the White House last week for a forum on job creation, is bullish on the prospects for domestic IT services firms. In a blog post, she wrote, "my unbiased analyst opinion is that IT jobs are coming back here and this transition will be at least as quick as the Indian software vendors' rise to dominance."

At the White House meeting were executives of major U.S. companies, including Intel, DuPont and Ford. "I'm calling on those businesses that haven't brought jobs back to take this opportunity to get the American people back to work," Obama said.

The White House is working to offer tax breaks and loans to such companies. IT services firms that set up shop in urban and depressed areas are also getting help from the states.

One company that is counting on this domestic growth in IT services is Systems in Motion. The company has increased its workforce from 65 employees to 190 in the past two years, and has a development office in Ann Arbor, Mich. It hopes to double in size this year.

Systems in Motion says that its costs are comparable to those of offshore development firms, and it commissioned a study by the University of Michigan Ross School of Business to back up that view.

University alumni with MBAs were asked a series of questions, and 20 respondents completed the survey. The study, completed just over a year ago, found that inshore IT services were 2.9 times more productive than offshore IT services overall.



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