Foreign Outsourcing Declines as SaaS Gains Ground

saas-outsourcing

While increasing labor costs in Asia are making headlines, a recent study has shown that U.S. corporations are more frequently opting to hire at home rather than outsource to a cheaper labor market. According to Procurement Leadersthe rate of outsourcing outside the United States has declined for the third year in a row. Whether due to quality or cost concerns, the trend toward backsourcing previously outsourced positions appears to be gaining momentum.

From Procurement Leaders:

“With unemployment numbers still hovering above 8%, pressure is mounting from Washington to bring jobs home. The tech industry seems to be moving in that direction, which is good news for US job seekers,” said Paul Heiselmann, partner in the Technology and Life Sciences practice at BDO USA, LLP.

With it being an election year, Washington, DC has certainly weighed in on the need for jobs to return to American shores. Previous attempts to encourage job repatriation through tax incentives met with mixed results, but there is clearly an interest in regaining those lost positions and, hopefully, spurring some additional economic growth. A mixture of inconsistency in outsourcing results, labor cost increase, customer perception and political pressure appear to be culminating in executives making the decision to limit future outsourcing projects and begin hiring closer to home.

Returning those jobs to the U.S. will require many companies to rebuild some of their infrastructure so that they can reabsorb the work…and the workers. Foreign outsourcing, particularly for financial services, frequently placed that infrastructure burden outside the client company. However, with the increase in software-as-a-service (SaaS) options, repatriating businesses are finding it easier and more cost effective to use subscription-based cloud computing for invoice managementexpense management and other services. Technology seems to be filling the gap that’s being left behind by the reduction in outsourcing projects.