U.S. technology companies are putting the brakes on plans to move manufacturing or back office operations to cheaper foreign markets, according to a survey of chief financial officers released Thursday.
Only 5, out of 100 technology CFOs said they were planning to offshore services or manufacturing in the near future, according to a survey this month by accounting firm BDO USA LLP. That’s a dramatic drop from the 16% who said yes last year and 20% who agreed in 2012.
After a series of economic disruptions and environmental disasters in the past few years, “CFOs are trying to look a little more holistically at outsourcing,” said Aftab Jamil, a partner at BDO who leads the technology and life sciences practice. “They are saying do we really save enough money that it is worth that risk?”
Labor costs have also risen overseas, which is swaying companies to keep operations in the U.S., Mr. Jamil said. Chinese private-sector wages, for example, rose 14% in 2012, according to China’s National Bureau for Statistics.
Of the companies that currently have offshore services or manufacturing, 29% said they were considering bringing at least part of that work back to the U.S. this year.
China and Taiwan were the top locations for technology outsourcing, with nearly two-thirds of the CFOs polled saying they had operations there. That was followed by Southeast Asia, where nearly half said they had operations.
Manufacturing was the most common type of operations companies outsourced, followed by research and development and IT services and programs.
“I’ve seen quite a bit of change in the last two or three years in terms of attitude and focus around offshoring,” Mr. Jamil said. “A few years ago, almost every company you talked with was looking to offshore their operations.” - (WSJ)