Offshoring has proven to be an effective way for companies to reduce the cost of custom software development. However, offshoring involves a lot of risk and other difficulties and countries like U.S. and some other european countries seem to have found an alternative in the form of nearshore outsourcing. Nearshoring is a form of outsourcing in which an activity is replaced to locations which are, cheaper and geographically nearer than offshore locations.
Although it is difficult to argue against the massive availability of talent and low labor costs in India and other locations in the Far East, there are a number of reasons that make nearshoring a more attractive alternative for many large organizations like time zone, geographic proximity, cultural affinity.
Indian IT companies have pioneered the offshoring with advantages of ‘low cost labour’ and ‘Skilled professional availability’ on their side but would that last forever? I do not know of many indian software companies which are involved in innovative software production and IT services seem to be their ‘bread and butter’. And now with salaries hike for indian software professionals are of the tunes of 10-15% year on year, the cost advantage is set to go off in next few years.
Not too far are the days when Nearshoring takes over offshoring.
Alarming bells for indian software companies?