IT Labor Boomerangs Back Home

Hidden offshoring costs are frustrating enough that disillusioned enterprises are starting to bring the work home.

For all its promise of cost savings, enterprises disillusioned and dissatisfied with offshoring IT labor are starting to bring that work home.

Language barriers, time zone differences and even unscheduled overtime are just some of the issues causing some U.S.-based enterprises increased frustration and pushing them to not just reconsider their offshoring policies but scrap them outright.

Joe Baca, for example, is backing out of a contract with an India-based company that has handled his organizations SAP AG enterprise software installation for the past two and a half years. In doing so, Baca expects to lose about six months worth of service fees and pay about $5 more per hour to have the work done in the United States. But for him, its worth it.

"The cost savings [of outsourcing] are not enough to outweigh some of the frustrations with the cultural differences of having outsourcers based in India," said Baca, director of application development with a $400 million Midwestern manufacturer that he preferred not to name. "We cant do anything in an emergency. Our hands are tied," Baca said. "We have to go back and say, Please translate this. In a service-level environment, the overruns are what are killing you. Overtime is an hourly rate, and its not built into the [outsourcing] budget." Baca is talking with Milwaukee-based CCI Corp. to pick up SAP R/3 software monitoring and plans to hire SAP ABAP programmers to update the applications in-house.

Baca is not alone. A recent survey by Boston-based IT research company AMR Research Inc. reported that less than one-third of the 220 companies surveyed that currently outsource some IT work are satisfied with the cost savings enjoyed by the process. Still, AMR predicts that the number of companies that will use IT outsourcing in the next two years will grow significantly.

/zimages/3/28571.gifeWEEK Executive Editor Stan Gibson says that outsourcers can apply lessons learned to drive superior deals. Click here to read more.

While large software developers such as Oracle Corp. and SAP have shifted a lot of internal development to places such as India and China, some vendors are finding that "Made in the U.S.A." has a certain cachet.

Enterprise applications management software developer Enetfinity Technologies LLC is considering moving its financial application programming back to the United States for just such reasons. Kelvin Johnson, vice president of sales and marketing and a technical consultant at Enetfinity, is experiencing difficulties with an India-based development center.

"Our experience [has been] that a lot of people there are good at programming, but they arent good at the business-logic part of application development," Johnson said. "You can give them a project to work on, and theyll do maybe a good 75 percent of what you want. But theres that 20 percent youll end up pulling your hair out about that youll have to redo or bring other people in from over here to finish or redo."

With his current contract up in December, Johnson is considering his alternatives. "Im not sure what well do, to be quite honest," said Johnson in Wayne, Pa. "They have done some good things, but you contract for more—we expected more than weve got. Most people are just looking for results. When theres money involved and you end up losing, that doesnt put a good taste in your mouth."