Could outsourcing to India be at threat not from anyone else but US itself? And NO, it’s not from Obama this time…


For years India has been the leading outsourcing destination for companies from the US. A number of factors like cheaper labour, lower costs, rising productivity and also the language factor have fuelled a boom in this sector. The recent speeches by Obama against it and also Philippines rise an alternative destination for outsourcing have not caused much of an impact.

But now there’s something bigger happening in the US itself which could put India’s tag as an outsourcing destination in jeopardy.

A number of small IT companies like Saturn Systems, Rural Sourcing, Onshore Technology Services, Cayuse Technologies are among 20 such companies which have sprung up in remote parts of US.

Two important reasons have given way to the growth of these companies: –

  • Dissatisfaction with India in terms of service, their poor understanding of the work and also their takeaway of jobs meant for the US
  • Challenges with visas issuing

Many of these companies have bagged a large number of corporate clients, built up very detailed and useful software and also started hiring in large numbers.

On an hourly basis they may cost about 10% – 150% more than their rivals overseas. But if one factors all the additional costs such as quality control and oversight, the rates are comparable. The rates they offer are cheaper than the domestic counterparts. They also have the big advantage of understanding the US regulations much better than their offshore counterparts and thus can be easier to handle.

Top Outsourcing Countries for U.S Companies

India has high outsourcing revenue of $50 billion which is expected to triple in size by 2020. In contrast to this, the rural outsourcing market in the US is worth lesser than $100 million. The interest in this has risen over the past couple of years since US has had its worst recession in years and the government is looking at ways of creating jobs. Factors like cost pressures on the economies of India and China may also help in the development of the rural outsourcing industry.

The biggest problem for the development of rural outsourcing in US is finding the right kind of people and also maintaining such a skilled workforce. But as Randy Willis, Cayuse Technologies says –

"The good news is we can supplement with lower-skilled work while we’re growing the deeper skills."

Do you think these rural outsourcers in US can sustain themselves or prove a threat to the Indian outsourcing story?

  1. […] has for long been critical of Indians taking up jobs meant to be theirs. So much so that Obama has always criticised companies who first offer jobs to Indians and then their own citizens. He has introduced measures like higher […]

  2. Jakob Truss says

    But come to think of it, the added competition will further fuel Indian or other offshore outsourcing providers to increase their competitiveness. How they do that, whether to reduce their rates or improve their training for outsourcing staff to deliver better services to clients, is up for them to decide. However, you must not also count out the fact that several US based firms have already enjoyed long term partnership with Indian outsourcing providers and I doubt if they would terminate that contract if new ones come along, especially if they are satisfied with the services they are getting.

  3. Aseem Rastogi says

    Yes and even though these companies are small, with time they could give some interesting competition to the Indian outsourcing industry.

  4. MicroSourcing says

    Those rural companies could compete with India, but there’s more to it than just labor costs. US firms that have been outsourcing offshore for years have already established close working relationships with their providers, and that’s not something they can just discard.

  5. Newport Realty says

    Outsourcing has increased a lot in the recent past. Many Indian professional are serving in there. It is a good post, very nicely presented. Keep writing.

    1. Aseem Rastogi says

      Thanks :)..Do keep reading my other posts..

      1. Newport Realty says

        I will surely do. Will wait for more of such kind.

  6. vikash says

    I only talk about IT and particularly small software development projects.

    If you check elance , odesk, getafreelancer or any other major outsourcing marketplace you’ll see dominance of Indian companies there. In small cities major outsourcing revenue come from these websites and other portals only.

    Can’t imagine how much employment it will take away if they ban it

  7. Altaf Rahman says

    I am layman in terms of IT / outsourcing etc. But I have a suggestion.

    There are so many first generation Asians recently settled in US. I am sure they are all youngsters. When they get married they take along their wives. Some enterprising Indian should start a outsourcing company in US by managing a network of educated housewives. It will provide additional income to a middle class family, give some occupation to ladies, It is costwise compititive, helps sooth US fears that jobs are shifting away from US, at teh same time we can control the market in a discrete way.

    All that is needed to start sucha set up is for outgoing Indians in some cultural organizations to start registering housewives during gatherings or word of mouth advt. Once you get a membership of lets say 100, you can start hunting for business. This can be a small set up. But imagine hundreds of such small set ups garnering business locally !!.

    Just my two paisa :)

    1. Aseem Rastogi says

      Sir, your two paisa is always really good :). And yeah this idea of yours sounds unique and interesting :).

  8. Ankit says

    The title though intriguing is IMO not backed by the content. First of all there is no definitive source for the reasons you site for ‘dissatisfaction with Indian companies’

    Moreover, the companies you mentioned setting shops in US. There are always hundreds of these setups but then again they do not have the bandwidth to take on the projects the Indian IT companies undertake and the market they cater to is very small. Not sure if there has been a change in that and if there is anything like i would love to know about it

    1. Aseem Rastogi says

      See, what I meant is dissatisfaction is what I meant by the dissatisfaction of the general public there in Indians not being able to understand their concerns.

      And also Indian companies not being able to manage the American regulations properly.

      Yeah there are hundreds of these setups. I truly agree that they may not be able to compete with the Indian outsourcing industry. But nonetheless, they could be an interesting player in the entire outsourcing game.

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