The 7 Myths of Offshore IT Outsourcing

Computerworld -
Myth 1: Offshore outsourcing is costing U.S. jobs.
A recent study by the McKinsey Global Institute calculated that for every dollar spent on a business process that is outsourced to India, the U.S. economy gains at least $1.12. The largest chunk -- 58 cents -- goes back to the original employer. And U.S. companies perform 30% of Indian offshoring, so money returns home as earnings.
The U.S. has lost 2 million jobs due to global trade over the past 20 years but in just 10 years has added 35 million new jobs.-[1]
It was U.S. technology -- the boom in telephony and fiber optics -- that directly contributed to the viability of offshore IT outsourcing. U.S. innovation will remain the largest competitive advantage we have over developing nations taking on outsourced work. Many jobs that aren't materializing during the economic recovery are lost not through outsourcing, but rather through improved efficiencies and business automation.

Myth 2: There's a stigma to offshore outsourcing.
In Bangalore, India, some 110,000 people are employed writing software, designing chips, running computer systems, reading MRIs, processing mortgages, preparing tax forms and doing other essential work for U.S., European, Japanese and even Chinese companies. Intel, Cisco, Oracle, Philips and GE are among the multinationals with significant R&D facilities there.

In fact, it would be challenging to find a single Fortune 500 company that is not outsourcing any part of its daily business operations to offshore outsourcing firms. Again, it's important to note that most outsourced jobs are supporting operations that aren't part of the core competency of U.S. firms, such as phone technical support, human resources administration and software coding.

Myth 3: The cost benefits of outsourcing are overstated.
With workers in offshore locations such as India and the Philippines commanding only 10% to 30% of the salaries that U.S. workers earn (with average IT employee costs ranging from $5,800 to $6,500)-[2], there is no doubt that savings can be achieved purely from a head-count perspective. However, the greater benefit of outsourcing is the migration from a fixed-cost IT environment to a variable pricing model that allows firms to gain better control over operating costs. There will be a reduced need for software and hardware infrastructure, as well as reduced costs for maintaining and upgrading hardware and software and for training software developers on the latest technologies.

Myth 4: It's a buyer's market for IT workers right now anyway.
Most firms underestimate the true cost of hiring an internal employee. Taking an employee with a base