Offshoring Could Be on the Outs in ‘09

An article in today’s Wall Street Journal reports that outsourcing tech work abroad is taking a hit despite the savings it can promise companies during this time of economic tumult. Outsourcing deals of this type were at their lowest in six years during the third quarter of 2008, according to the piece, which attributes the change to companies’ general uncertainty and caution due to the economy. While that may be true, xchange’s conversation last week with CIMI Corp. analyst Tom Nolle indicates this cold reception could be a sign of what’s to come.

According to Nolle, the U.S. is seeing a backlash against offshoring. He cites Dell’s (DELL) recent move to give customers the option of getting U.S.-based call center agents as one indicator of this trend. The Your Tech Team service from Dell, which may be known as much for its call center troubles as it is for its computers, offers customers assurance of domestic call center reps and limited wait times for $12.95 per month, or $99 per year for those with new Dell computers. (Without the service, customers are likely to get connected to tech reps in India or the Philippines.)

“The backlash against the support that’s provided by offshore call centers has been so radical and so horrible that a lot of companies are saying ‘we cannot afford, at a time that consumer spending and business spending is constrained, to piss everybody off. So we’re going to have to figure out a way to do this in house,’” said Nolle. “And I think they think the labor market is going to be more open, and they’ll have more opportunities to do that here. So I think that in the call center area you’re definitely going to see more activity to do more on-shore call centers in the U.S., be they run in house or by a service provider.”

In addition to more out-of-work folks, who could potentially populate U.S.-based call centers, one could argue that the economy and the incoming, hope-inspiring presidential administration could help further spur “buy American” sentiment, at least to some extent. The new Obama administration and Congress also could potentially set up new rules that make offshoring less appealing.

Whatever the case, Nolle said: “I’m confident that you’re going to find the whole offshoring trend is going to take a big hit in ’09.”

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