Will Outsourcing Survive Political Noise In U.S.?

June 5, 2011

According to an online article in CFO.com, outsourcing benefits not just large firms but smaller ones too.  Nitish Grover of GLG Research looks at how outsourcing is climbing and the hurdles that it faces, particularly in India.

One of the strategies during the recession, for Indian outsourcing giants like Infosys and Wipro was to cut profit margins and maintain their client base. This has proved to be a good tactic for achieving reasonably good result until 2010. India’s flagship industry has maintained an influx of revenues during the recession phase that was much greater than those of financial and banking industry and retail.

With new technology being deployed in India, it is feasible to have as many as five employees to work on your company’s accounting work and still come out ahead. Ideally, it does not make sense to outsource unless a company is able to maintain a 30% advantage over domestic labor.

However, the political implications of outsourcing are having a detrimental effect on the industry, particularly among Americans. By far, the most threatening aspect of offshoring is the shipping of jobs overseas when so many Americans are out of work. The political noise over outsourcing is expected to grow in the U.S. and it will not be an issue that should be ignored.  With a lawsuit against outsourcing giant, Infosys, claiming alleged visa fraud, even reputable companies like Infosys can have a negative presence in the U.S. Companies like Aegis based in Mumbai are already hiring workers from the U.S. for its call centers in New York.

In addition, the kind of outsourcing in finance and accounting, for example, that requires about five experts will entail a core group of specialized, highly skilled workers. This will also create complications since not everyone can work on these projects. Moreover, one of the major disappointments of customer care centers located in India is that foreign clients are unable to communicate their cultural lingo to near-native English speaking call center workers in India.


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