It’s hardly news when India’s Tata Consultancy Services [TCS] opens a new outsourcing facility, unless it happens to be in Ohio.
TCS, one of the world’s top hired guns for corporate IT and back-office services, opened its first U.S. software development center in a suburb of Cincinnati on Mar. 16. And it’s hardly alone. Rivals including Accenture and India’s Wipro are pursuing similar ventures in unexpected places around the U.S., from Oregon to Arizona to Georgia.
Make no mistake. There’s still plenty of money to be saved by shipping work to far-away places with cheaper labor. Yet the economics of outsourcing are changing: With wages rising sharply in India and the dollar’s value sliding against the Indian rupee, “there’s been a 30 percent change in cost over the last year,” says Andy Singleton, chief executive of Assembla, a company that organizes distributed software development teams. Three years ago, it didn’t make sense for Assembla to hire anyone in the U.S. because labor costs were so low in India. But now, “as costs change, we end up with a lot more Americans,” Singleton says.
Niche Opportunities for the U.S.
While India is still a great deal for many companies that want to cut costs on high-tech workers, some experts predict the labor savings there could evaporate in 5 to 10 years. That has spurred some interest in lower-cost labor markets in the U.S. “We’ve seen quite a few small, rural sourcing projects,” says Doug Brown, partner of Brown-Wilson Group, an outsourcing consultancy.
If nothing else, these new IT facilities in unexpected places provide an intriguing alternative to Silicon Valley and other pricey high-tech hotbeds. A July, 2007, report from the Information Technology Association of America [ITAA] estimated that midsize metropolitan areas and rural communities could provide a 30 percent cost savings over top-tier IT hubs in…