A weak dollar, rising fuel prices, and a global recession are all conspiring to undermine the cost advantage of offshoring. Oh, and then there's those pesky rising wages in places like the Pearl River Delta and Bangalore. The world really is flat... as BusinessWeek reports:
Duke University professor Arie Lewin estimates that the benefit of doing business, from a labor-cost point of view, in such locales as Bangalore, India, will disappear for some companies in three to four years.
Last week, we saw that a similar trend is undermining China's manufacturing advantage (also in BW):
A new Chinese labor law that took effect on Jan. 1 has significantly raised costs in an already tight labor market. Soaring commodity and energy prices, as well as Beijing's cancellation of preferential policies for exporters, have hammered manufacturers. The appreciation of the Chinese currency has shrunk already razor-thin margins, pushed thousands of manufacturers to the edge of bankruptcy, and threatened China's role as the preeminent exporter of low-priced goods.
Looks like the world really is flat - but not in terms of how much it costs to access labor in developing countries. Rather, things are starting to cost the same regardless of where you do it.
