European Leaders Blog recently posted a story examining a NeoIT report that highlights the risk a falling dollar poses in global sourcing deals. Their post suggests that companies "build currency fluctuations and hedging in global service contracts as part of contingency plans aimed at minimising the impact of these ongoing currency changes." In my view, while currency hedging can help smooth near- and medium-term price movements, if the dollar stays low over a period of time -- just as jet fuel has stayed high in the past few years -- hedging can be much less effective, just as Southwest has recently learned.
Perhaps, given the dollar's slide, it's time to permanently reevaluate global sourcing decisions in some areas. Consider that an IT or development resource in Indianapolis might now be cheaper than in Bangalore these days. Food for offshoring thought, I suppose. Perhaps Indiana, Kansas and similar "low cost" states might be the ultimate beneficiary of a continued weak dollar. Hmmm ... this is beginning to sound like a Midwest conspiracy to keep the dollar low!