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Four Factors Leading to Growth in Domestic IT Outsourcing

Posted by John Hughes | 10/2/15 6:06 AM

Our world has seen a sharp rise in domestic outsourcing in the last decade. While offshore IT service providers continue to grow and have allocated many resources into staffing their delivery centers, U.S. domestic centers have shown increased activity as a whole.


There seems to be a trend in organizations wanting to bring IT closer, and many times brought right back in-house. This was led a few years ago by the surprising and significant announcement by GM that they would be insourcing all of their IT operations. This move was going to require a vastly higher amount of cash for GM to execute compared to outsourcing, but nonetheless they pulled it off.


This trend and GM’s risky decision mirrors a sentiment in the business world that having closer control of IT projects and development will be a long-term benefit. This decision is not based on talent, as the talent pool is there, and there are clearly cost advantages. The factors that are causing a change from offshore delivery centers towards onshore Database Administrators lie deeper in the organizational fabric of many small and large companies in the United States. Domestic outsourcing can be a higher immediate cost, but let’s look through some of the motivating factors that are growing the activity of local delivery centers:


Broadening Client-Specific Needs


We are first-hand witnesses to the impressive, fast-paced speed of changing technology. New technology is introduced daily, creating innovative types of services and giving rise to cutting-edge industries. In turn, this has created a broader set of service needs. Traditional offshore delivery can become overly complicated by these new necessities, and many times the best solution is choosing an onshore vendor that can solve them more efficiently. This rise has led to a direct growth in domestic outsourcing. Today there are many business initiatives that encourage local inter-dependence, for example:


  • A city government with a legal mandate to only contract hyper-local vendors.
  • A large architecture firm that requires weekly face-to-face status updates at their headquarters in Seattle, WA.
  • An observatory that requires sensitive on-site calibration and maintenance.
  • A large hospital that must allocate a percentage of contracts to local vendors.


Operational Efficiency


Onshore delivery centers are providing an enormous benefit in terms of efficient communication and execution. Onshore outsourcing avoids the structural issues that are brought about by offshore delivery, such as high attrition and turnover rates. Onshore outsourcing centers can align operations quickly, allowing your team members to connect easily and develop an active partnership with individual experts within your IT department. One of the most frustrating, and common, issues that businesses run into when working with offshore IT vendors is having an unclear path of workflow and communication. Offshore vendors frequently change their assigned resources throughout the lifecycle of a project, creating massive slow-downs and roadblocks. There is nothing worse than having one expert lead the architecture of your project, only to see that contact replaced with a different, ‘more convenient’ resource for the implementation process. The new expert now has to relearn the entire architecture that the initial expert intimately built. This is inefficient double work, and makes it seem as if the architecture phase was a complete waste of time and as they say, “time is money”.


Onshore outsourcing vendors understand the importance of consistency and professional communication and capitalize on providing dependable resources, a valuable asset, which offshore delivery centers struggle with.


Legal Issues


Risk management motivates many essential decisions within large organizations. In the last twenty years, companies have made a deliberate move towards finding diverse ways to manage certain externalities to mitigate potential legal issues. One of the topics of discussion in this area has been the regulatory requirements that go along with Visa sponsorship and availability. While some companies, big and small, have found systems to manage visa requirements appropriately, others are choosing to outsource domestically thereby offloading the potential legal risks entirely. These legal issues can be addressed in a number of ways but nonetheless an increasing number of companies are choosing to make the switch from offshore delivery centers to domestic delivery centers.


Soft Skills


One of the biggest assets that companies are seeing in onshore delivery centers is the ability to leverage the soft skills of domestic resources. There are times that a precise type of cultural business knowledge or affinity can make a project more efficient. Companies are increasingly putting more emphasis on the ability of delivery centers to execute projects efficiently, and less on cost. Getting to know the external talent working on individual projects can help a company properly manage their skills and optimize their ability to execute. A recent study by AutoTask shows management solution customers value quality communication and an effectual working relationship more than the overall cost. Organizations, regardless of size, often find the biggest differentiator with domestic outsourcing is a personal touch. In an extremely technical world, relatable people skills are proving to move the needle dramatically.


Selecting a location for business processes is just one of many considerations along the path to a successful outsourcing commitment. It is important to have an explicit understanding of the company’s goals and business requirements. Is the priority lower costs, or is it better quality and efficiency, or access to resources and technology? The decision to work with an onshore provider of IT services should incorporate a rigorous evaluation of the vendor’s labor costs, process improvement and automation expertise, industry knowledge, and a clear insight of the benefits and risks associated with their outsourcing process.


ManageForce understands the importance of quality execution and clear communication as an outsourced partner. ManageForce moves beyond SaaS, providing Great People-as-a-Service (GPaaS) to truly “Cover Your Apps”.


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Topics: Enterprise IT, IT Management, Database Management, Database Administration, Remote DBA

Written by John Hughes


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