Trump presidency could sound death knell for offshore outsourcing

U.S.-based offshore outsourcing customers should prepare for the effects of a Trump presidency on their IT services deals.

By Stephanie Overby
Dec. 1, 2016

However, Indian IT services firms aren’t the only providers of offshore outsourcing. U.S. multinationals are also heavily reliant on offshore resources and temporary work visas as well. Industry observers expect the corporate lobby to push back on populist proposals. “Politics is still very much a money sport,” says Bendor-Samuel. “Trump is likely to quickly find that campaigning and governing are far different, with members of congress being much more concerned about corporate welfare than the average voter.”

How a Trump presidency could impact IT offshore outsourcing

Fersht, however, predicts a more significant impact on the offshore outsourcing industry, saying the election of Trump could be the “death knell” for offshore outsourcing as we know it. Any moves by Trump to curb temporary visa usage or limit trade could further fuel the use of automation and cloud computing options in lieu of traditional offshore outsourcing.

“The FTE [full-time-employee] model dies with the Donald,” Fersht wrote in a recent blog post. “The offshore outsourcing industry must look to develop new generation engagements that do not involved labor-dominant pricing. The surviving service providers will start providing services and not people… The one bright spot, in my view, is that these changes were happening in any case, and Trump's protectionist policies are merely going to accelerate reality.”

Rutchik advises U.S. customers to review their contracts to ensure that they have the requisite protections in areas such as change of laws, migration of service delivery locations, and termination rights in the event their deals become uneconomical. They should also begin to calculate the costs of moving certain functions like their IT help desks onshore. Clients should also accelerate their migration to IT and business process automation options, Fersht adds. “Whatever the likelihood of impact,” Rutchik says, “the result — if it happened — could be devastating. So customers are well-advised to review their risk mitigation and flexibility options.”

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