President Obama wants companies to bring jobs home, but smart businesses are already rethinking the insourcing and outsourcing mix--due to business advantage, not political rhetoric.
President Obama said this week that it's time for American businesses to bring back jobs they have outsourced to other countries because "a lot of folks are still looking for work." There is a push to repatriate some tech work that has gone overseas--but it has nothing to do with altruism, nationalism, or political expediency. It just makes good business sense, in some limited cases.
The background: Obama met with a handful of business leaders from the tech and manufacturing sectors at the White House Wednesday, ostensibly to get their input on how best to "insource" work that's gone to India, China, and other low-cost locations.
"You've heard of outsourcing. Well, these companies are insourcing," the president said. "That's exactly the kind of commitment to country that we need--especially right now, when we're in a make-or-break moment for the middle class and those aspiring to get to the middle class here in the United States."
Obama added: "When a lot of folks are still looking for work, now is the time for us to step on the gas." And while he gave a nod to what he said were the "the bottom line" benefits of sourcing domestically, Obama asserted "a moral case" for insourcing.
Great sound bites, especially in a political season where attention is focused on 99 percenters, Occupy protesters, and general class warfare. But here's the reality: There's no broad trend toward insourcing, but there is a recognition that the pressure to cut costs over the past decade led many companies to push the envelope on offshoring a bit too far, and that it's time for some rebalancing.
That's a point on which executives at both North American and India-based IT companies I've talked with agree. CGI Group is a midsize tech services company based in Quebec, with offices in more than 40 U.S. locations as well as centers in Bangalore, Hyderabad, and Mumbai, India. CGI employs roughly 10,000 workers in the U.S. and 20,000 elsewhere.
Of late, the company has been opening development centers in small U.S. towns such as Belton, Texas, Lebanon, Va., and Troy, Ala. CGI U.S. president George Schindler, who attended Obama's insourcing summit, told me that such locales are becoming more cost competitive with India and offer a pool of untapped IT talent that can add some geographic balance to CGI's workforce.
"These are areas that have been harder hit by the downturn than others, but they offer a set of dynamics that are working in our favor," Schindler told me following his visit to the White House. "They offer a great cost of living, they are motivated from a local government perspective, and there's partnerships with community colleges that can train people in the skills we need. It makes an attractive cost case, whereas the opposite is happening in some other parts of the world."
As for creating jobs in the U.S., Schindler says it's great to be able to contribute to local communities. "But it's business first--the economics have to be there," he says.
InformationWeek Tech Digest, Nov. 10, 2014Just 30% of respondents to our new survey say their companies are very or extremely effective at identifying critical data and analyzing it to make decisions, down from 42% in 2013. What gives?