A recent study by BDO Seidman LLP, an accounting and consulting organization, finds that nearly a quarter of the chief financial officers at US technology businesses who outsource plan to consider the United States as the main outsourcing destination in 2009.
Twenty-two percent of the chief financial officers surveyed pegged the United States as an outsourcing destination; 16 percent named China and 13 percent named India. These were the three top countries named in the survey.
China takes the number two position with 16 percent, followed by India with 13 percent. Nineteen percent say they have no plans for further outsourcing, according to the study
“While last year may have produced an outsourcing bubble, 2009 will see companies retrench to survive in the face of reduced demand. The United States has become a far more viable option for them,” said Douglas Sirotta, a partner in BDO Seidman’s technology practice.
“This year we are seeing three global factors that are causing US technology companies to pull back from traditional outsourcing locations, led by the recent boom and bust of the worldwide economy. Satyam’s fraud case and the terrorist attacks in Mumbai are causing a lot of companies to reconsider operating in India. And supply chain and shipping cost issues in China are negatively impacting the attractiveness of outsourcing technology operations to the Far East,” Sirotta added.Higher shipping costs from China to the United States may also weigh into decisions about whether the United States is seen as an attractive alternative to farming out operations to China.
The cost of shipping a 40-foot, standard container from East Asia to the eastern seaboard of the United States has tripled since 2000, according to a late 2008 report from CIBC World Markets in Toronto.Other findings from the study include:
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The most common non-US locations for outsourcing are India, at 50 percent; Southeast Asia, including the Philippines, at 31 percent, down from 50 percent in 2008; China, at 19 percent, down from 46 percent in 2008, and Western Europe, at 19 percent.
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Economic climate affects international growth plans. Less than half, 42 percent, of the CFOs surveyed indicate that they have operations outside the United States, compared to nearly double that amount, 79 percent last year. Nearly a third, 29 percent of respondents, said their primary concern regarding international growth is an uncertain business or political climate. Twenty-six percent cite international business and tax regulations, with 21 percent citing currency risk, 14 percent intellectual property risk and exploitation, and 10 percent training of international employees as their primary concern.
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Of those outsourcing, the most common functions being off-shored currently are: manufacturing, at 54 percent; information technology services and programming, at 46 percent; and research and development, distribution and call centers, all at 35 percent.
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