There’s no use denying that we live in an increasingly global economy, where workers and customers often transcend borders. One of the widely-discussed consequences has been the offshoring of millions of jobs in manufacturing and tech to countries where labor is cheaper and regulations are laxer.
More and more U.S. companies, however, are concluding that the advantage of cheap labor may not outweigh the drawbacks of relying on workers half a world away. The New York Times recently reported that the offshore services sector is only anticipated to grow 8 percent over the next five years, down from an average of 15 percent between 2011-16.
Instead, many companies are looking to outsource to American software development firms that provide high-quality work, not to mention a number of other conveniences.
Here are a number of benefits that American companies find when outsourcing software development to U.S firms.
The price of offshore labor has gone up
There is a reason that many of the most popular sources for foreign labor –– India, Bangladesh, China –– are described as “emerging” economies. Their rapid growth in recent years has pushed up wages and as a result, while workers in those countries are still cheaper to hire than their U.S. counterparts, the difference in wages is nowhere near as great as it used to be.
For instance, ten years ago a U.S. software engineer cost five to seven times as much to hire as one in India, according to one IT consultant who spoke to the New York Times. Now, however, they only cost about twice as much.
The rapid pace of internet-based services today, whether through websites or mobile apps, demands quick turnaround as well as a team of workers that can be called upon at any time to address bugs or make updates. That’s not as easy to coordinate with a group of workers operating on a different continent.
There is a certain degree of uncertainty that you have to accept when you rely on labor in a foreign country. You will have to deal with foreign laws and regulations, including perhaps hiring expert staff that can advise you on the matter. It may also be challenging to hold a foreign outsourcing firm accountable for poor work.
The turbulent politics swirling around international trade are constantly threatening to upend the deals that U.S. companies have struck abroad. One has only to turn on the news to hear politicians propose plans to levy higher taxes or tariffs on firms that offshore.
Buy American is popular
There is no way to assess the public relations advantage that comes from sourcing domestically, but there is clearly a big chunk of the population that likes the idea of supporting local companies that rely on local labor. Touting the use of well-paid, American workers is a major marketing advantage.
DevOps as change agent
It’s hard to ignore the impact that DevOps has had in driving many organizations toward onshoring their software development. After all, DevOps values proximity to operations and continuous development that improve business outcomes over a financial equations that lowers per unit development cost. DevOps emphasizes working smarter, not harder. More organizations are also embracing a fluid development approach consistent with agile software development. It’s far easier to deploy agile when most of the software developers are based in the same or similar time zones rather than on opposite sides of the planet. When software development is embedded in an organization and responsive to its needs, great things are bound to happen.