Note from the CEO: Oh snap, there goes the pampered life in the islands. This Trump guy and blockchain technology are messing with my “workcation” plans of becoming an offshore service provider. If Trump’s lower corporate tax rates happen and new fancy technology is adapted, the offshore allure goes away. What next? Everyone has to move to cheap Fargo (cool hip city in North Dakota)?
This article points out that the advantages once held by offshore service providers, especially in the fintech space, are being eroded and are no longer viable. New tax rates, blockchain technology and mergers are causing a total ‘rethink’ in outsourcing services to sectors such as fund administration, IT administration and other back office function. Looks like offshore service providers (OSPs) are going the way of steamships.
“With the Trump effect and the promise of lower corporate tax rates (35 percent to 15 percent), we are likely to see a resurgence of moving jobs back onshore. However, not all of this will be done by people.
Why would any organization these days outsource anything using offshore labor arbitrage? As many IT (ITO) and business process outsourcing (BPO) contracts come up for renewal, the question remains, how many rebids will be successful – 50 percent, 25 percent or 10 percent?
There is overcapacity in outsourcing as demonstrated by further mergers – HP acquiring CSC and CSC acquiring Xchanging – demonstrating that management has no strategy other than consolidation.
Only Ginni Rometty at IBM has committed to pushing the company towards becoming a technology-enabled business, investing heavily in Blockchain and other technologies with the objective of creating a smarter planet and smarter cities. It is a very smart move and may ultimately protect shareholders.
Blockchain will accelerate the decline of offshore outsourcing providers given that the technology is fundamentally destructive, eliminating the non-value added administrative activities of the middlemen. It collapses entire industries removing the center, delivering new levels of efficiencies and cost savings through smart contract automation.”