Top Factors Driving Domestic IT Outsourcing Growth

Domestic delivery center activity in the U.S. is back on the rise after a substantial period of offshoring, but outsourcing still remains firmly the go-to option for most IT outfits. Writing for, Stephanie Overby turns to the Everest Group’s managing research partner, Eric Simonson, for the factors that still make outsourcing so attractive.

Domestic Outsourcing is “In”

The punchline is that the offshoring model is not broken. In fact, Simonson cites the effectiveness of industrial-international service delivery as the reason for domestic growth:

…by and large, these delivery center setups are more about bringing the wisdom of global delivery into the domestic market.

Specifically, there are five main reasons why the domestic outsourcing model might be considered attractive to IT:

  1. Diversified buyer needs
  2. Leveraging onshore culture/soft skills
  3. Overcoming high attrition and structural challenges
  4. Managing regulatory externalities
  5. Client-specific needs

What Work Works

Work that is typical of domestic outsourcing might include application development in the financial services, public, manufacturing, retail, and consumer packaged goods sectors. Consulting, systems integration, and testing are also hot items for U.S. outsourced IT.

Although the larger centers still reside state-side in scalable tier-4 cities like Ann Arbor and Des Moines, the majority of domestic work is actually handled by providers with closer ties to India. This is simply due to a desire of offshore providers to get closer to their actual customers.

But this is not to say that domestic workers are staffing the new domestic centers. To the contrary, 32% of all delivery center employees are temporary or permanent landed talent. Most centers are located in the South, specifically the Atlantic South and in Texas. Simonson notes that while cost-savings are a factor in this regional trend, economic growth is also a consideration.

Means of Employing

In the meantime domestic IT service centers (60% of them) continue to grow. IT talent is hard to come by, so providers have resorted to unconventional means, such as choosing cities with high quality of life and then bringing in talent from elsewhere. Automation provides some relief, but for certain tasks that require people, nothing beats onshore.

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