Sometime last month we had a post of the findings in an AT Kearney Survery, which highlighted that the Cost Arbitrage between the US and offshore countries like India would be around atleast of the next 20 years.

Today in a post by Steve Hamm, he quotes Don Brilz, of Brilz Consulting (ex-TPI) about "Offshore SHAM"

Brilz predicts "traditional labor arbitrage advantages of off-shoring to India are fast going away. He says in a typical deal the client pays $50 per programmer per hour in the US, compared to $14 per hour in India. Yet because of the significant costs of setting up an off-shoring relationship and the ongoing overhead, "the overall economics of the deal and the savings aren't that great," says Brilz, a Canadian. "It's becoming less and less economically viable, and, in five years, off-shoring will dwindle to about zip."

At that point, and even now, the main reasons to move offshore will be for the expertise of the programmers and the business processes of the IT service companies. "It only makes sense if you outsource for the business value in the processes and experience of the company, plus the potential," says Brilz. He expects the ratio of on-shore to off-shore labor in a typical outsourcing deal to shift from 20/80 today to something closer to 50/50 in five years."

Source: 1

Prashanth Rai