Business, Economics and Jobs

America the Gutted: outsourcing comes full circle


GERMANY - Man holding an attache case with the names of Marokko, Korea, HongKong, Poland, Japan, China, Jakarta.


Ulrich Baumgarten

The question is: When outsourcing returns home, does it pass "Go" and collect $200?

Probably not in this economy.

Our "America the Gutted" series takes an in-depth look at how the American middle class is shrinking, while elsewhere, namely in Asia, the middle class has mushroomed.

One major reason for this reciprocal phenomenon is outsourcing. American jobs have up and moved, and not all of a sudden. What we're seeing now is the accumulated effect of a trend that has been ongoing for more than two decades.

But there are now signs that the outsourcing market has become saturated, or has fallen out of favor. Kinks in the system have been identified. Circumstances have changed at home and abroad. The flow of jobs overseas has, perhaps, reached an inflection point.

Now, outsourcing giants, like Bangalore-based Infosys Ltd., are expanding their operations — though not in India, where you might think. Bloomberg reports on Infosys' new office in Atlanta, Ga., staffed almost entirely by Americans.

Major American corporations — like GM and GE, both early adopters of outsourcing — have also decided it's time to come home. GM said it plans to bring 90 percent of its IT work in-country over the next three to five years, and GE is planning an 1,100-person facility outside of Detroit.

Big US law firms, as we coverd in "America the Gutted," are also taking to this trend reversal, opening huge back offices in lower cost American cities, like Nashville and Wheeling, W. Va., where they can save money without violating their comfort zone.

Many companies have become motivated by more than just the bottom line, especially for complex tasks — like human resources and software development — when quality is paramount.

“Companies are saying some jobs are best done closer to where they are, not cheap as possible somewhere else," Madhusudan Menon, who heads Infosys’s Atlanta center, told Bloomberg. "They’re rebalancing their onshore and offshore outsourcing.”

Moreover, Infosys used to have predominantly Indian employees working in the US, but that has gotten more difficult. Bloomberg reports:

Indian outsourcing companies are finding it tougher to get visas for workers brought from India, and some U.S. businesses want to outsource -- yet keep jobs in the country. State tax breaks also provide incentives to hire locally.

And for everyone, the political cache is undeniable. Just ask Romney and Obama, who continue to duke it out over who is "outsourcer in chief."