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November 02, 2003

The downside to overseas outsourcing

So, the cheap labor overseas looks good to you -- you being the CEO of a US technology firm. According to a Reuters article, not every flower is a rose in those foreign markets.

Do you need reliable networks overseas? You might have to wait. India, for instance, has constant power outages.

Sixty-six percent of companies surveyed were disappointed with their outsourcing contracts, according to PA Consulting Group. "The survey shows only 39 percent of the companies would renew contracts with their existing outsourcing suppliers, and 15 percent planned to bring services back in-house."

Besides unreliable power, other pitfalls include security hazards, cultural differences, and logistics nightmares.

Most technology outsourcing is still done domestically, though the lower wages of India, Russia, and China are tempting. But the savings don't always offset the problems. Time differences between US and foreign companies can mean delayed customer queries. And how about the significant number of religious holidays in a country like India?

Nevertheless, the trend for now is strong -- work is being outsourced overseas.

Posted by George F. Smith at November 2, 2003 09:50 AM

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