'Insourcing' reflects changes that impact the bottom line

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As the election season moves into high gear, the rhetoric surrounding outsourcing versus hiring domestically is predictably rising. The White House jumped into the fray last week, hosting an "Insourcing American Jobs" forum with business leaders from the tech and manufacturing sectors. President Obama called insourcing--defined as moving jobs back to the United States--an emerging trend and appealed to corporate America's sense of patriotism to increase hiring at home.

While there may be some movement in that direction, it has nothing to do with patriotism but instead with something you already know about--the impact on the bottom line.

For some companies, it has begun to make better business sense in recent years to hire U.S.-based IT services providers than providers offshore. Costs in some low-wage countries are not as low as they once were, and costs in the United States aren't as high as they once were as providers have set up shop in more rural areas, particularly near universities. What's more, some large foreign providers have been hiring more Americans for a variety of reasons, including leveraging the benefits of proximity to the client.

In a report called "Investing in America: Building an Economy That Lasts," the White House noted a number of companies that have brought jobs back to the United States. Customer support, software development, engineering and other high-tech jobs have returned to U.S. soil for bottom-line reasons. The report mentions GalaxE Solutions, which is expected to hire hundreds of IT pros at its Detroit shop, and Novo 1, a call center company that is bringing jobs from around the globe back to centers in Michigan and Texas.

"Companies 'insourcing' to the U.S. points to better performance in U.S. service centers relative to many foreign locations, off‐setting the benefits of lower wages abroad," the report says. "As these economic shifts occur, they have encouraged companies--both large and small--to reevaluate whether it makes sense to locate abroad as opposed to in the United States. As the U.S. becomes more cost competitive, the other advantages of locating here, including access to a high‐skilled workforce, proximity to customers, reduced cultural and linguistic barriers, the strength of intellectual‐property protection, and access to the world's leading research universities, are becoming increasingly important."

In the meantime, to further encourage bring jobs back to the United States, the administration said it will boost federal support for state programs that encourage investment, expand the SelectUSA program, and beef up the Small Business Administration's promotion of its insourcing loans.

President Obama also said he plans to propose new tax incentives for companies that bring jobs back to the United States and do away with tax breaks for companies that move jobs offshore. That would certainly affect the bottom line, but whether you think it's patriotic probably depends a lot on where you sit. - Caron