Outsourcing Far Afield or Close to Home?

Many companies are taking the path less traveled when setting up outsourcing operations.
John EdwardsSeptember 8, 2004

India remains the most popular information-technology offshoring location for U.S. companies, but observers say India’s period of competitive advantage may be waning. In fact, with local wages rising at a 20 percent annual clip, executives at companies from Bangalore to Brahmapur are reportedly beginning to shop out some of their own operations.

“This outsourcing to India is definitely a very short-term phenomenon,” insists Phil Fersht, an analyst who covers offshoring for The Yankee Group, a Boston-based technology-research firm. “Other countries are maturing and getting involved with the global economy.”

Indeed, executives who are considering outsourcing their corporate IT functions are hearing from some unexpected quarters. At the top of the list: Africa. Experts report that several African nations, including Uganda, Senegal, and South Africa, are getting into the outsourcing game. To date, though, Ghana seems to be the destination of choice for U.S. technology companies setting up offshore operations in Africa. Case in point: Affiliated Computer Services, a $4 billion (in revenues) outsourcing company headquartered in Dallas, is building a new data-input center in Accra that will employ 2,000 workers. Three years ago, the company employed only 65 workers in Accra.

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The increasing number of offshore destinations is also making it possible for companies to implement more-nuanced outsourcing strategies. Call-center services specialist LiveBridge Inc., for example, operates call centers not only in India and Argentina, but also across the border in Canada, as well as in Portland, Oregon; Lewiston, Maine; and Auburn and Olympia, Washington. Explains CFO Chuck McLaughlin: “We have an onshore, near-shore, and offshore strategy.” All those shores enable LiveBridge to provide different levels of service to different customers in different locations. That, in turn, helps the company control its SG&A.

As political pressures mount, look for less-skilled U.S. workers to become more attractive to global companies. The hot spots? Depressed manufacturing centers such as Detroit and Cleveland, says Richard Samson, president of EraNova Institute, a management-consulting company located in Mountain Lakes, New Jersey. “Many unemployed workers and their spouses are willing to man phones or keyboards at competitive rates, minus foreign problems or political flak.”