Many U.S. businesses are improving productivity and profitability by outsourcing routine functions to low-cost countries like India and China. But AT&T's plan to bring home some 2,000 customer service positions shows that not all forms of offshoring are created equally.

A good number of companies are giving up on outsourcing phone-based customer support to foreign locations. AT&T last week publicly confirmed its intention to repatriate tech support for its home DSL users. Dell made a similar, high-profile move a couple of years back, and many other businesses are following suit--albeit quietly.

AT&T moved because it found a way to create similar jobs in the U.S. at "competitive" wages, the company claims. Hmmm. The new jobs will pay $30,000 per year, plus annual benefits worth another $10,000. That's at least four times what AT&T would be paying for those services in India. Hardly competitive under a strict cost comparison.

What's really going on? The thinking here is that poor service was costing AT&T too many customers in the cutthroat consumer broadband market. A number of bloggers have pilloried the company for its efforts in this area. Many English-speaking Indian customer service reps speak with a heavy accent that's difficult for Westerners to understand, and customers have only so much patience.

It may be that outsourcing customer service will end up as a grand experiment that didn't work out. Like New Coke. However, that shouldn't taint all outsourcing initiatives. My hunch is that even as businesses cut back on offshore phone reps, they'll increase their outsourcing of programming and other tech services that don't directly touch the customer.

Most consumers care as little about who wrote the software programs they use as they do about who built the cars they drive. As long as the stuff works, they'll go with the lowest-price provider. Indian techies can code like the dickens, so there's no problem there. But when it comes to customer service outsourcing, there's an increasing amount of evidence that it just doesn't work.