Reverse outsourcing? Ugh.

The other day I was chatting with somebody about outsourcing industry. The conversation turned to the term that has been widely been used recently - “reverse outsourcing” - Indian companies opening software development centers overseas. My friend argued that the main driver for this trend was that cheap labor was not available in India anymore due to rupee depreciation and wage increases; hence Indian IT companies are forced to look elsewhere.

Though there is some truth to this argument, I felt that it was simpleton logic. No doubt, Indian companies are encountering a slate of market challenges – maturing landscape, depressing margins, and talent crunch. There are other forces that are outside their control such as currency fluctuations, work visa issues etc. However, cost savings alone is not the driving force behind this.

This discussion got me thinking if the phrase “reverse outsourcing” had an implicit negative connotation. For me, reverse outsourcing by Indian companies is the next logical progression of their global growth strategy. Build global organizations, tap into new markets, get close to the customer’s business and execute better and more intimately. The game has changed from cost savings to providing overall value – no more hiding behind the low-cost model. This image makeover from world’s cheap back-office to strategic partner has been long due.

Over the years, outsourcing has become synonymous with “stealing local jobs and shipping off to India”. Though this perception has been changing, it is still looked down upon by general public. I understand media outside India using this phrase but I cringe whenever I see Indian media uses this phrase. Whenever a TCS or Wipro or Infosys opens an overseas development center, reverse outsourcing is generously used to report it. I’m not sure if it is a deliberate attempt by Indian media to get political mileage out of “creating local jobs” in US or Europe.

I may be nitpicking but I would rather use the phrase “global expansion” instead of reverse outsourcing. Thank you.