September 25, 2012, 11:48 AM — There's no question domestic outsourcing is more expensive than sending IT services abroad. The 215 enterprise buyers surveyed in the September 2012 report expect to save about 16% when sourcing work stateside versus around 22% when sending work to India. But the cost effectiveness was just one of the most important criteria when deciding where to outsource IT services; workforce skills and experience, availability of qualified workers, and English-speaking capabilities were also major factors, according to the survey.
The corporate leaders also said they would consider outsourcing domestically if the costs savings were at least 15% while they would consider offshoring to India only for savings of at least 30%.
"That's a key finding. Those are big differentials," says HfS Research founder Phil Fersht. "If you go to a service provider, they should be able to give you two options--local or international sourcing."
The contrast between in capabilities between India and U.S.-based outsourcing was stark in several areas. While 78% of respondents said domestic outsourcing arrangements offered good cultural understanding and communication skills, just 30% said Indian deals did.
Likewise 72% gave the U.S. good marks for business understanding and taking initiative, while 37 and 38% gave the same responses for India. And 71% said U.S.-based outsourcing deals were innovative, while 41% said Indian deals were.
Respondents reported a more favorable playing field in terms of work ethic--77% gave the U.S. high marks for being hard wording while 71% said the same for India. And it was nearly a dead heat in process adherence, an attribute often associated with Indian IT firms; 72% said Indian outsourcing engagements were process-driven while 71% said their U.S. counterparts were.
IT Service Providers Reluctant to Go Domestic The problem is that many providers can't or won't offer viable domestic outsourcing options--at least not at the scale that they currently do in India or other overseas locations.
"The service providers haven't invested an awful lot in building up those local resources because they've been going offshore," says Fersht. "Buyers may not want to move more work offshore, but they don't have a lot of choice from the industry today."