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Home > Business > PTI > Report

US cos offshoring business nearer home

February 28, 2007 10:19 IST

In what could be bad news for the Indian BPO sector, a growing number of Silicon Valley companies are moving offshore businesses to geographically nearer locations in an effort to cut costs and address customer-service complaints.

The trend, known as 'nearshoring', involves outsourcing white-collar jobs closer to home, such as Costa Rica, Mexico and other countries in the Western Hemisphere, instead of half way around the world in places like India and China.

The obvious advantages of nearshore sites are their ample supply of knowledgeable and low-paid workers, language and cultural compatibility and similar time zones.

For big US tech companies, shifting jobs to closer locations can avoid the 'operational bumps' that would otherwise occur in the more distant, more popular offshoring destinations in Asia, the San Jose Mercury News reported.

"It's important that the world knows that it's not just China and India," said Diane Burton, an associate professor of management at MIT's Sloan School of Management.

"It is truly a more global phenomena where there are skilled and talented people around the world who are ready, willing and able to do the kind of work that (represents) good jobs."

Language fluency was a big reason why some of Sun Microsystems' technical support jobs were moved from India to Nova Scotia in Canada, the paper said. Customers in the Americas who needed tech support had griped about having a difficult time understanding the English typically spoken in India.

"This move offered a better fit for our customers," said Sun spokeswoman Dana Lengkeek.

The paper said it was hard to quantify the number of jobs being nearshored, either by company or by country, because employers aren't required to disclose that kind of information.

For the most part, if a company doesn't spell out its nearshoring initiatives, it is 'impossible to find out,' said Erran Carmel, an associate business professor who wrote a book called 'Offshoring Information Technology.'

Experts nevertheless say nearshoring is catching on with tech giants in Silicon Valley and companies nationwide. The paper said that according to several business professors and executives of offshoring consulting firms, Intel and Hewlett-Packard are among the US companies on the forefront of nearshoring jobs.

According to NeoIT, a consulting firm that advises companies on offshoring, Intel sent finance and information technology work to Costa Rica last year.

Intel spokesman Mark Pettinger said the Santa Clara-based chip company has been filling about 150 new financial services jobs in Costa Rica, but he said that's not nearshoring.

Intel "hasn't been shifting from one location to another," Pettinger said. "It's been scaling up to meet the needs of those markets in those geographies."

As for HP, statements made by company executives in the US and abroad, in addition to a company document, reveal the computer and printer giant is shifting portions of its workforce to countries with lower labour costs.

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