Almost regularly, you read of one news paper article or some report that mentions the growth of outsourcing activity because companies must reduce more costs. On the heels of that we find a report that is completely contradictory to the first we read, saying outsourcing will be hurt as companies cut IT spending.

Today, I read a Mckinsey report titled “Time to rethink Outsourcing”. The report was just as contradictory (in my mind) as the reports I read day in and day out. It states that given the “falling dollar value, rising oil prices, and rising wages in offshore countries”, companies may want to bring back their manufacturing operations to the US. But that companies may not be able to do so that easily due to “availability of skilled talent, potential for productivity gains, importance of speed, local import and tax implications, etc.”.

I disagree with the comment about “the lack of availability of talent” but yes, rising oil prices are a pain, the devaluation of the dollar is not easy to swallow, and the wage increases in offshore countries like India are a reality.

But do we really think that companies will begin moving work to the US anytime soon?

There have been millions of dollars invested in offshore setups and the person looking at the bottom-line numbers is probably still seeing savings from their offshore activities, regardless of the other costs are associated with managing the offshoring activities.

I doubt it. If, and it’s a big if, if there is any movement of work coming back to the US in any significant volume, it won’t be evident for a few more years.