India and China May Not Be the Answer

The global financial crisis and the resulting slowdown of international growth have given business leaders a breather to reconsider the future direction of offshoring. That’s a good thing, because companies have often failed to conduct disciplined analyses and, as a result, viewed offshoring as a foolproof panacea: a low-cost, high-return strategy that lets them shift overseas everything from information technology to manufacturing and call centers — with no offsetting costs or disadvantages.

But as time goes on, they are sacrificing more and more as they follow the offshoring fashion. For one thing, cost savings are transitory. Wages keep rising in China and India, by as much as 20 percent a year for some jobs. And personnel turnover is at abnormally high levels — at call centers in China and India, as much as 80 percent of the workers have to be replaced each year; as a result, training is anything but a negligible expense.