When I talk to my colleagues and fellow bloggers at Iasta, I always give them a hard time about living in the low-cost country next door to Chicago -- Indianapolis, Indiana, to be specific. I mean, these guys can afford mansions at the cost of half a kitchen renovation where I come from. And they're only a three hour drive from downtown Chicago! Also it's worth considering that they're on the same time zone as us most of the time (though I confess that I'll never understand what time it is driving through Indiana, and I usually end up an hour late or early when I make the trek down.)
All of this has the makings of a great "near-shoring" discussion. I won't disclose Iasta's specific cost per developer, but let's just say that I've done the math, and at this point, I'd guess it would be less expensive to develop a Web 2.0 application in Indianapolis than in Bangalore (and yes, the talent exists in Indy to do it). It's interesting that I'm not alone in thinking about my nearby state as a potential beacon of labor cost arbitrage. According to a recent Fortune article Indian outsourcers are looking at regional domestic labor cost numbers and putting their own capital into the game based on what they're seeing.
The above-linked article (no registration required) discusses how Tata and others are making investments in US-based "in-sourcing" centers which employ hundreds or thousands of residents in low-cost Midwest states, among other areas. Now, savings is not the only focus in their investment. According to the piece, at today's labor rates for a call center, US "workers cost up to 40 percent more than their counterparts in India." But the result is a more "culturally fluent, less frustrating 1-800 experience." And of course, Tata's customers can now choose whether or not the off-shore cost savings is worse hassling and annoying their own customers for.
On a broader level, this type of investment in US outsourcing operations by Indian providers marks a shift that many saw coming a couple of years back. To wit, Indian management expertise when it comes to taking on corporate and back-office functions from companies is not just about offshoring to a low cost region. Rather, their future expertise will aim entirely at managing an outsourced function to begin with -- regardless of whether or not it is an off-shore, on-shore or hybrid mix of service delivery.
This transition will be critical for the Indian firms to make as skilled, English-speaking labor costs continue to rocket up across the Indian subcontinent. But Wipro and Infosys are not the ones who should be worried about cost structures. I believe that their newfound focus on outsourcing management competence is something that should give the the IBMs and Accentures of the world something to chew over as their partners hit five star resorts for their late summer vacations.