Outsourcing becoming less effective

March 7, 2008 12:37:16 AM PST
A possible economic "silver lining." as THE U.S. dollar weakens overseas, "outsourcing" is becoming less efficient.

The price of everything is going up: oil, gold and even labor.

That's why in this down economy, there 'is' one group that stands to benefit -- the American worker.

"Sort of a bright spot perhaps, for U.S. workers is that importing foreign labor in the form of outsourcing is also becoming more expensive," said Professor Michael Solt from San Jose State University.

Associate dean at San Jose State's Business School Michael Solt sees the outsourcing trend shifting away from places like India, where workers are demanding higher salaries as the U.S. dollar weakens and the rupee strengthens.

Six years ago, an outsourced IT worker demanded $25 dollars an hour. Now, the going rate is $35 dollars.

"Maybe even some firms will limit the amount of outsourcing in other countries and choose to maybe hire more local workers," said Professor Solt.

That's exactly what Fremont based, Sierra Atlantic is doing; the software company 'used' to send 85-percent of its work India and China.

With the change in the economy, the company's senior vice president says, it just doesn't make as much financial sense.

"We started looking at more local options because more talent is available here also and as the cost difference is lesser and lesser, it is easier for us to fetch the resources and look at local delivery options," said Sierra Atlantic Senior Vice President G.K. Murthy.

As a result, Sierra Atlantic is shifting its business model by boosting its domestic work force by 200 employees.

While the search for low cost labor continues and the outsourcing trend moves away from Asia, professor Solt sees it heading south to Africa.