In 2013, The Hackett Group predicted that 950,000 IT jobs would be moved offshore by 2017. But times have changed. Recent research from Randstad Technologies indicates that U.S. companies are reshoring IT support. There are three primary factors contributing to this reversal.
Political and economic volatility
Jim Larkin of Randstad Technologies tells GoodCall® that social and political unrest in other countries is quite common and can pose several risks to an organization. “This can present potentially significant disruptors to a company’s business and operations,” Larkin says. “It is not uncommon to have labor strife, protests, and other events present challenges to offshore operations from time to time.”
In addition to the potential for political upheaval, infrastructure issues can also pose service problems. “Infrastructure outages can be somewhat regular occurrences, disrupting users’ ability to work and be productive and also mean increased support costs while teams react, troubleshoot, and bring critical systems back on line,” Larkin says.
“The inability to quickly respond to man-made or natural disasters – limited visibility into or understanding of potential threats – is also of concern when dealing with certain geographies outside the continental United States.”
These also are some of the factors driving a reversal in offshoring in other sectors. Harry C. Moser, founder and president of Reshoring Initiative in Kildeer, IL, tells GoodCall® that companies are bringing manufacturing jobs back to the U.S. for a variety of reasons. However, one of the issues is supply chain interruption risk – which can include natural disaster risk and political instability risk.
Cybersecurity concerns and reshoring
For some companies, offshoring IT support includes offshoring responsibility for cybersecurity as well. “Trying to manage domestic cybersecurity issues is tough enough – managing security in a facility located in another country compounds the difficulty and the level of risk,” Larkin explains. “The level of hacking and security threats in other countries is higher, as evidenced by recent events around the globe.”
In 2016, a study by researchers at the University of Maryland ranked nations based on their vulnerability to cyberattacks. The U.S. was ranked the 11th safest country in the world. At the other end of the spectrum, China, India, South Korea, and Russia were ranked some of the most vulnerable countries.
Larkin explains that in such companies as healthcare providers and financial services institutions, the ability to protect customer data is crucial.
Offshoring intellectual property can also pose problems. “Adherence to copyright laws and protection of proprietary IP can be a challenge and an inherent risk when employing offshore providers,” Larkin says. “Many geographies and countries have less stringent regulations when it comes to copyright infringement and protection.”
Vanishing cost savings
Companies typically offshore IT support to reduce costs. However, Erik Brynjolfsson, a professor at MIT Sloan School of Business and director of the MIT Initiative on the Digital Economy, tells GoodCall® that the cost savings from offshoring IT support are no longer as significant as they were in the past. “Advanced uses of AI for voice recognition and problem solving are automating more and more routine types of support functions, while increasing the demand for more skilled workers, where the U.S. often has an advantage.”
According to Larkin, in more established offshore IT support markets, hourly wages and costs to do business in the more mature offshore support market continue to rise. This is also consistent with findings from Moser’s organization that rising wages and total costs are contributing reasons for the reshoring of manufacturing jobs.
What are some of those costs to do business? “Competition for resources and attrition is high, which often results in higher recruiting and on-boarding costs,” Larkin explains. “In addition, the high amount of oversight, periodic travel expenses, and other ‘hidden’ costs, which are often overlooked in the business case to move support offshore, can begin to tip the scales the other way.”
The use of AI and robotics is also changing the business landscape. “Newer ’enabler technologies’ such as automation and robotics and advanced data analytics are leveling the playing field,” Larkins says. “It’s no longer the case that you can either have low cost or high quality – with these leading-edge technologies, companies are finding they can achieve both and keep their operations onshore or bring them back from an offshore model.”
When offshoring is still advantageous
While U.S. companies are reshoring IT support, Larkin says there are times when offshoring may still be a good option. “For example, simple, routine, and repetitive tasks that do not require a great deal of troubleshooting and don’t involve a high degree of complexity – like routine password reset transactions, well defined service requests, and high scripted support processes.”
Non-verbal interactions, such as email and chat are other areas in which offshoring may be advantageous. “Some companies and service providers have come up with hybrid solutions that keep voice interactions with end users over the phone onshore, while sending more passive communication channels like email and chat to offshore resources where the language barrier is lessened as written communications are often better and easier to understand for the user.”