The offshoring crisis that never quite happened

Clay Risen writes in The New Republic:

In a world where telecommunications evaporates distances, there seems to be little drawback to shifting work overseas. But as more companies move operations outside their offices, they are finding that offshoring has limits–and those limits are more significant than many once thought. First, there’s cost, traditionally the number-one factor in offshoring decisions. Amazingly, even India, with its billion-plus people, is facing potential worker shortages. As early as 2003, the country’s National Association of Software and Services Companies was warning of a 235,000-worker shortfall. Demand, of course, increases prices, or, in this case, wages. Late last year Hewitt Associates, a major human-resources consulting firm, released a study that showed rapidly rising wages among Indian workers–11.4 percent during 2004 (14.5 percent in the IT sector), following similar double-digit growth during 2003. All of which led Vivek Paul, president of IT at India’s offshoring giant Wipro, to warn in November that his country was quickly losing its low-cost advantage.

More here.