Outsourcing Risks Drive American Businesses to Reshore IT Services

At some point or another, most of us have called tech support and received assistance from an agent who was thousands of miles away in a different country. Outsourcing IT services to countries with cheaper labor forces became commonplace over the past twenty years, but now, many U.S. companies are moving IT support back to the United States.

Though offshoring was once seen as an automatic money-saver, today's businesses find many risks associated with outsourcing IT jobs to far-flung locations.

"Social and political unrest, which in turn affect economies, can be common in many popular offshore service locations around the world," says Jim Larkin, director of pursuit strategy and innovation for human resources and recruiting technology firm Randstad Technologies. "These can present potentially significant disruptors to a company's business and operations. It is not uncommon to have labor strife, protests, and other events present challenges to offshore operations from time to time."

As an example, Larkin cites a massive September 2016 labor strike in India. The strike, which saw 180 million participants, cost the Indian economy roughly $2.7 billion. Since 1991, Larkin notes, India alone has seen 16 such general strikes.

Risks of Offshoring in the 21st Century

Once upon a time, tech support involved a row of workers manning telephones and following scripts. Today, however, many IT support agents require access to personal customer information and/or company information on a scale unheard of even a decade ago. This increases the risk of cyberattacks.

"Some companies have concerns that offshoring means compromising cybersecurity," Larkin says. "Trying to manage domestic cybersecurity issues is tough enough. Managing security in a facility located in another country compounds the difficulty and the level of risk. The level of hacking and security threats in other countries outside of the U.S. is higher, as evidenced by recent events around the globe. The bottom line is that controlling security half a world away is inherently more difficult."

Many businesses reshore to the U.S. to take advantage of stricter laws and protections.

"One of the biggest reasons is more lax regulations and enforcement around the protection of intellectual property and data protection," Larkin says. "Also being so far away, there may be greater risk of foreign governments and competitors attempting to infiltrate operations and take advantage of loopholes that do not exist in the United States."

Reshoring Tech Jobs in the Face of a Skill Shortage

One of the greatest concerns for companies seeking to bring their IT services back to the United States is the current labor shortage in the country's tech sector. Companies taking steps to reshore IT should ensure they have the proper technologies and recruiting practices in place to immediately address this problem, lest they find themselves short-staffed on the home front.

Staffing concerns aside, the benefits of reshoring IT may outweigh the costs.

"Over the last decade, offshoring IT support was thought to automatically achieve cost savings, but that is no longer the case," Larkin says.

Larkin recommends that companies reshoring their IT services focus on the following four areas:

Knowledge Transfer: Ensure you have a plan for moving your knowledge capital back onshore.

Staffing: Make sure you have the proper talent in place to make the transition.

Setting Up Tools: Moving back onshore, you will need the talent and technologies to ensure your reshored team is equipped to do the job.

Organizational Change Management: Well before you reshore, your broader organization needs to understand that the transition is happening and what they can do maximize the benefits. Those that don't communicate well with their user base fail to make an effective transition. Companies need to set expectations, whether that's through town halls, forums, a letter from the CIO, etc.