I was talking to a friend a mine who owns a company that has a development off shoring division in Africa and is closing down this part of her business. She didn’t go into the reasons, but most people get out of a business venture when they aren’t making any money.
IT development off shoring sounds like a good business to be in: No health costs, easy hire and fire policy, and rather cheap labor and communications…a bargain. Right?? Well I remain to be convinced. On a long term perspective and think this market is going to be tough. The problem I see with this trade is that it seems that every country from Guatemala to Greece is entering this line of business, and is competing on one thing…….yes wait for it- PRICE.
I may be brand loyal the quality of Scottish salmon, Belgian beer, German engineering and of course British sports cars, but Pakistani PERL coders, or Siberian SharePoint administrators don’t really put my hand on my wallet.
I feel this is a case of déjà vu of the 70’s when the World Bank convinced most of the 3rd world to adopt an agriculture policy to grow certain crops. To everyone’s surprise there was an over supply problem, with a lot of these countries literature betting the farm on this economic theory. And as Bono will tell you, it’s still being felt today.
One of the problems with off sourcing, particularly of IT to English speaking countries is that it’s difficult to differentiate yourself with your neighboring country who’s doing exactly the same thing.
Yes I know Israel have perhaps better encryption software than Iceland, and India has a reputation of tech support for your desktop screen saver, but these are only 2 countries of the emerging (BRIC) world.
If coding is going to be commoditized like wheat, or steel, then it’s difficult to add value to the product.
Some may say the world is flat, but in some cases so will the profit.