The data shows that the wage differential between “here” and “there” is no longer as stunning as it once was. Labor costs in China and India, the main outsourcing hubs, have been going up by double-digits amounts every year for the last 15 years, while salaries in the US stayed the same. Labor in some other countries is still cheap, compared to US costs, but the culture difference is greater, and infrastructure is lacking, making outsourcing projects there even more risky.
In addition, a lot of data (and emotions) have been collected over the last 15 years about off-shored work done badly. Companies are now armed with data that activities that used to be considered peripheral to the organization’s success, when done badly, can have enormous influence on the bottom line. A lot of this work is now being brought back in – geographically and culture-wise.
Another problem, that has surfaced with the practice of off-shoring highly-skilled work, concerns intellectual property rights. US companies are used to strong protections of the law, police willing to investigate, and public, generally familiar with and respectful of IP. As some organizations have learnt the hard way, IP rights are different, and are not nearly as vigorously enforced outside of the US and the developed world, as expected. Companies that choose to outsource work involving sensitive or valuable information find themselves largely on their own, when it comes to enforcement, as local law enforcement, even if local laws support foreign company claims, usually chooses not to get too involved in such cases.
All the arguments boil down to one big question: does shipping work across the globe make US companies more or less competitive? With the data available today, when all costs and benefits are taken into account, the answer appears to be that it is more advantageous to work close to home.