ONSHORING….Dan Drezner will love this story:
In a twist on offshoring that Northrop has dubbed onshoring, the global defense and technology corporation has been shipping computer work to small-town America, shunning India’s Bangalore and Mumbai.
Century City-based Northrop picked Corsicana and six other small cities, including Lebanon, Va., and Helena, Mont., as locations for employees who develop software and troubleshoot technical problems for clients hundreds or thousands of miles away. It costs Northrop about 40% less to have the work done in Corsicana than in Los Angeles — savings similar to what would be achieved by sending jobs overseas.
….Onshoring, in fact, is becoming trendy. Some U.S. companies have recently pulled back from India to set up shop in rural areas where access to high-speed broadband connections isn’t the problem it was just a few years ago, and where lower rents and wages are attractive.
Xpanxion, an Atlanta-based software developer, relocated its test operations to Kearney, Neb., from Pune, India, because the time difference was hampering communications. Computer maker Dell Inc., once at the forefront of outsourcing to foreign countries, opened a technical support center in Twin Falls, Idaho, after customers complained about overseas workers’ English-language skills.
The story doesn’t give any indication of how big this trend is, and at this point it’s probably still pretty small. But it wouldn’t surprise me if it picks up. My own experience with offshoring is that labor rates have to be way lower for it to be cost effective, so if overseas costs go up a bit and domestic costs go down a bit, that’s all it takes to change the calculus for a substantial number of firms. Welcome to the broadband revolution, rural America.