{"id":4643,"date":"2008-10-13T17:17:00","date_gmt":"2008-10-13T17:17:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/can-obama-turn-the-usa-into-a-competitive-sourcing-location\/"},"modified":"2008-10-13T17:17:00","modified_gmt":"2008-10-13T17:17:00","slug":"can-obama-turn-the-usa-into-a-competitive-sourcing-location","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/can-obama-turn-the-usa-into-a-competitive-sourcing-location\/","title":{"rendered":"Can Obama turn the USA into a competitive sourcing location?"},"content":{"rendered":"

\"Manhole-la\"<\/a>Being ineligible to vote in this country, I’ve been an <\/span><\/em>amused observer<\/span><\/em><\/a>\u00a0of one of the the most enthralling and contentious elections in years –\u00a0and trying to understand\u00a0how each candidate will\u00a0impact the future of the global outsourcing industry.<\/span><\/em><\/p>\n

What is clear, is that shipping jobs offshore isn’t necessary\u00a0very good for the local unemployment rate – the age-old argument of focusing US staff on “higher-value” work is wearing a bit thin these days.\u00a0 What’s more, many offshore service providers\u00a0are now\u00a0focused on taking on more higher-value work activities for their clients, in addition<\/em> to routine transactional work.\u00a0For example,\u00a0once you have your general ledger run from a service provider in, say Chennai, what is now stopping that provider taking on higher-value accounting services, such as budgeting\/forecasting and business intelligence?\u00a0 That provider basically owns\u00a0<\/em>and understands much of the revenue cycle of that client,\u00a0hence the natural next step is to move up the process value chain. And if your current provider won’t move up the value-chain, there is a\u00a0proliferation of KPO providers willing and ready to take on higher-value offshore work.\u00a0 Moreover, while a firm may have been enjoying good quality COBOL programming from Brazil, what’s stopping that provider offering systems architecture work for their client, which is\u00a0among\u00a0the\u00a0costliest onshore IT services?<\/p>\n

We’ve now been sucked into a global employment war for sourcing services, and from what\u00a0I was hearing from Mr Obama today, he intends to give US firms tax-breaks to source work onshore.\u00a0 I’m not sure exactly how he plans to do this (he seems to have a lot of good intentions without getting specific on how he plans to execute), but it wouldn’t surprise me if he\u00a0plans to initially incent buyers, as opposed to\u00a0the providers, to source work to onshore US\u00a0locations.\u00a0 This is the opposite strategy of the Indian government’s STPI tax scheme<\/a>, which gives tax-breaks to new Indian organizations (mainly suppliers)\u00a0in the region of 10-20% for their first 10 years of inception, designed primarily to bolster\u00a0its software industry, but also directly applies to its service providers.<\/p>\n

Look at it this way, you can hire staff in low-cost US locations for a low as $25K a year for back-office administrative work.\u00a0 If you can reduce that further, to $22K a year as a result of tax incentives, and the cost of health-care is reduced\/subsidized, the price differential with locations such as Lat-am and India\u00a0is minimal.\u00a0 IT, on the other hand, is significantly cheaper in locations such as India and China for all levels of services.<\/p>\n

Here’s my take:<\/strong><\/p>\n

For BPO services, the US is still in the game.<\/strong>\u00a0 The issues surrounding client \/ employee contact still favor onshore services (even though offshore services are improving by the day), plus the fact that there is still a great supply of mid-level executives who will be anxious to keep their jobs in the forthcoming months.\u00a0 With significant incentives to keep work onshore, I can see the US stepping up as a serious BPO location.\u00a0 Not a bad thing for the BPO industry, as long as the service providers invest wisely in attaining the right onshore\/offshore balance within their delivery infrastructures.\u00a0 Moreover, the onus on sourcing we’re going to see from the restructuring financial services industry is going to\u00a0entail a delicate balance of onshore\/offshore BPO work.\u00a0 If the major financial services firms struggle to sell off their Indian captives<\/a>, we may well see several of them scale-down their offshore dependence and seek onshore services as an alternative.<\/p>\n

For IT services, it’s looking a bit late to pull much of this back.<\/strong>\u00a0 In India, for example, IT services have become the life-blood of the country’s economy, and the skills in basic programming are widely available for mainstream applications.\u00a0 Even if US wage rates for programming work come down significantly, there is also a major issue with the fact that the quality of many IT services delivered from offshore locations is now consistent.\u00a0 The core battle is with services needed from\u00a0business-process architects and staff with deep industry-specific expertise.\u00a0 We have seen many of the leading offshore providers invest in their onshore deliver centers over the last year – and we can expect to see continued significant competition between the incumbents and offshore providers in the coming months for onshore-related work.<\/p>\n","protected":false},"excerpt":{"rendered":"

Being ineligible to vote in this country, I’ve been an amused observer\u00a0of one of the the most enthralling and contentious…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,835,79,81,838,836,95],"tags":[],"organization":[],"ppma_author":[19],"class_list":["post-4643","post","type-post","status-publish","format-standard","hentry","category-business-process-outsourcing-bpo","category-f-a","category-hr-outsourcing","category-it-outsourcing-it-services","category-kpo-analytics","category-procurement-engineering-supply-chain-outsourcing","category-sourcing-locations"],"yoast_head":"\nCan Obama turn the USA into a competitive sourcing location? - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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