Everyone tends to think that the offshore software development is cheaper because they only compare labor costs. But when you add costs associated with the management overheads and productivity differences, cost savings vanish or become negligible.
Bridgewater, NJ (PRWEB) November 19, 2013
For years, American employers have been outsourcing jobs to other countries like China and India to cut costs, but now more companies are looking to strengthen operations at home by bringing jobs back to USA in a trend known as 'reshoring.' Most focus has been on the overseas manufacturing jobs being brought home but this trend is becoming more and more prevalent in the IT industry. Mantra Information Services is one such company focused on bringing high-tech jobs back to USA as they announced last week that they have ceased their offshore operations.
Mantra, a custom software development and consulting company based in New Jersey, started offshoring software development in 2009 amidst the rising demand for low cost development from its customers. After four years, the company shut down its offshore development center in India in October. The rising employment costs, employee retention issues, time zone differences, and low productivity levels were cited as the main reasons behind the company's decision.
This ‘reshoring’ trend in the high-tech industry is relatively new. Companies like Apple, Microsoft and IBM have been bringing more and more of their work back to USA. But it’s not just the big tech companies that have been considering reshoring, small tech companies have also started following this trend.
“Everyone tends to think that the offshore software development is cheaper because they only compare labor costs.” Says Mantra’s CTO, Maulik Shah, “But when you add costs associated with the management overheads and productivity differences, cost savings vanish or become negligible.”
Whereas offshoring was once considered a competitive advantage, it is now often considered the opposite. Why has offshoring become so disadvantageous for app development companies? There are a number of reasons. In India, wages increased 13% in the past year and in the IT sector wages went up as much as 35%! The offshore turnover rates are also much higher than onshore with average retention being around 1 year. Workers will switch companies for even $1 an hour. It can take six months to hire and ramp up a new person. The rising cost of living in the developing countries like India and China has been a big factor in increased labor costs and other employment issues. Which is driving many of the outsourcing firms from India to explore destinations with cheaper labor costs or expanding their operations in USA and Europe.
Time zone differences is a big factor. China and India are on the other side of the world and 8-10 time zones away for US East coast. So when American managers are getting to work their offshore counterparts are leaving for the day. Gone are the days of 24x7 support and night shifts at the offshore firms. More and more offshore companies are adapting normal business hours. This leads to a lack of live communication, loss of efficiency, and stretched timelines. Language and cultural barriers have also made utilizing overseas workers more difficult. Colloquialisms aren’t always understood and the meaning and intention gets lost in translation.
“The US market is extremely competitive and every business wants quickest time to market with top notch quality which is only possible when you have project teams with up-to-date technical skills and in similar time zones with the ability to have face-to-face meetings when required.” said Shah.
By ‘reshoring’ Mantra has been able to strengthen their ability to respond quickly to customers' demands, eliminate inefficiencies and most importantly bring jobs back to the USA and do their part to reduce the New Jersey unemployment with high-paying jobs.
With the rising costs of offshore programmers, availability of high-skilled local talent, and innovation required for creating exciting new products, the US tech industry is embracing the reshoring trend.
About Mantra Information Services
Mantra Information Services is a custom software application development and solutions company based in New Jersey. Mantra helps businesses improve performance through innovative technology solutions. More information can be found by inquiring at 908-450-7878 or on web at http://www.mantrais.com.