A few weeks ago BDO Seidman, LLP released the results of their annual BDO Seidman Technology Outlook Survey and some of the results were quite startling (worrying even, if you see it from a free trade vs. protectionism angle).
According to the survey; 62 percent of the responding US companies outsource services or manufacturing. A pretty typical number according to our experiences from the European perspective; the startling results come when the respondents were asked where they will go to find the market for this outsourcing:
- 22 percent answered the US
- 16 percent answered China
- 13 percent answered India
Douglas Sirotta, a Partner in BDO Seidman’s Technology Practice explained the numbers by saying the following:
“This year we are seeing three global factors that are causing U.S. technology companies to pull back from traditional outsourcing locations, led by the recent boom and bust of the worldwide economy. Satyam’s fraud case and the terrorist attacks in Mumbai are causing a lot of companies to reconsider operating in India. And supply chain and shipping cost issues in China are negatively impacting the attractiveness of outsourcing technology operations to the Far East.”
But that’s not the only reasons for the backshoring; Business Week reported that the Indian government is worried that protectionism and the regulations that rule the US stimulus package (as well as tax-reforms) are also part of the equation.
Whilst I can agree with the worries expressed by the respondents of the BDO survey; supply chain risk must be part of the equation when one seeks to outsource even non-core categories; the worries of the Indian government is of even greater importance. Protectionism should not have to be a factor that has to be considered when managing a global supply chain.
