Rising costs hit offshoring

Jun 18 2008 by Derek Torres Print This Article

According to Pacific Bridge, who regularly puts out an Asian HR newsletter, multinational companies in India are starting to rethink their offshore plans. In fact, according to one recent article, the cost of an employee in India is starting to cost anywhere from $45-60k per year - in US dollars!

With the cost of living and business on the rise everywhere, it's certainly no surprise to see that India is no longer the worldwide capital of cheap labor (China probably wears that mantle now, one day to be followed by Africa).

However, moving forward, what is the best response? Should these companies (Hello, Dell), continue to maintain established Asian operations or bring the jobs back home? The article focuses on skilled labor, but what is the new cost of unskilled labor, such as call centers? Do these jobs incur the same 12% rate rise as the technology sector?

When we focus on the cost of offshoring or the new reality based on rising costs, I think it's essential that we look at the big picture and not just the attempted justification for hiring skilled labor there. $60k is a pretty good salary in most places in the United States; especially since this number included training and travel (most likely to the United States).

Despite the rise in costs, I can't imagine any of these companies pulling out especially to return to the US. That would be a lot of crow to eat, as well as counterproductive after all, the goal was always to lower costs, not raise or equal them.

So the next direction may be even further east while the likely response would be for Indian companies to offer some sort of incentives for companies to remain.

No matter how you slice it, it seems to be an assured victory for both business and government, but the displaced workers across the US and Europe seems to be on the losing end of the stick of that deal.


Older Comments

Hi Derek,

Interesting post! There is a Kansas City company is taking a DIFFERENT approach to managing IT solutions, providing companies with a combination of on and offshore outsourcing to help keep costs low. They are offering tips to help companies decide whether or not to use outsourcing for their IT needs. Here is a link to a whitepaper with the companies outsourcing solutions.

Hope you find it interesting Abby Koehler [email protected]

Abby Koehler

Interesting. I only started a Virtual Buzz Assistant network 2 months ago that strickly helps US virtual assistants become marketing experts and be more specialized VA's. Sure they are a little more expensive, but you can count on them for being more savvy to the culture and communicating better.

Maybe we are on the cutting edge of stealing their business model and making it better. :)

Ron McDaniel Ohio