Just as President Obama calls for less offshoring of jobs, at least in IT, he may be getting his wish. Firms are starting to have second thoughts about IT offshoring. Costs are rising, and the effectiveness of offshore IT work has been cast in doubt.

In response, some vendors are gearing up to support IT "inshoring" by connecting American IT specialists with the firms that are looking for their skills. The shifting trend from IT offshoring to inshoring could be welcome news for American IT workers as well as for the Obama administration.

Push and Pull

As reported by Patrick Thibodeau at InfoWorld, the previous trend toward offshoring is fading out due to two main factors. On the one hand, wage rates in countries such as India are rising. This reduces the competitive advantage to going offshore.

Another disadvantage to IT offshoring is the uncertain quality of offshored work. High turnover at Indian firms is one factor. A more subtle factor is that offshore workers are remote--in context as well as geography--from the problems they are asked to solve. Agile development processes, calling for close collaboration among development teams, is a factor driving the new trend.

According to entrepreneur Brian Keane, offshore IT workers often "just don't understand how the application [they are developing] is being used." This contextual knowledge requires more than just teleconferencing with customers--it requires a shared body of experience with customers.

Offshore workers rarely have this level of familiarity with the customers' needs. Keane is responding to this problem by establishing a new firm, Ameritas Technologies, to concentrate on the US domestic IT services market. Says Keane, "[His company will be] focusing on jobs that have gone offshore, but should have never gone offshore."

A Turning Tide?

The importance of context suggests that some areas within IT will see greater shifts toward inshoring. The internal functioning of a virtual machine is much the same no matter where the server it runs on is located. But the decision to opt for a public or private cloud is much more contextual.

Business intelligence (BI) and customer relations management (CRM) are even more contextual. Providing effective BI means understanding the needs and wants of top management. CRM calls for dealing with an even more idiosyncratic group--customers.

Arguably, it is just these highly context-dependent aspects of IT that are becoming increasingly important for small and midsize businesses (SMBs). The underlying technologies have reached a high level of development. Many of the challenges going forward relate to user interaction, highly specific to users and their contexts.

Looking for solutions to these challenges may mean looking closer to home.