Trump’s emphasis on U.S. job creation—paired with tougher stances on trade and potential scrutiny of visa programs—is accelerating a shift from offshore to domestic outsourcing. Companies are already responding, and U.S. firms cite advantages in innovation pipelines, agile collaboration, and reduced hidden costs/risks compared to offshoring. Tightening labor markets abroad and policy uncertainty (tariffs, IP protection, H‑1B constraints) further increase offshore risk. Expect the reshoring trend to continue gaining momentum as policies evolve.
- On multiple occasions during his campaign, Trump scorned the official U.S. unemployment figure, calling it “such a phony number” and suggesting that unemployment is, in fact, much higher—in double digits.
- During his Thank You Tour in early December, he told a Fayetteville, NC crowd that the U.S. should view trade “almost as a war,” promising to get tough on trade: “We have to look at it almost as a war, because that’s what has happened to us...that’s what has happened to our workers.”
- Reports from the December 13 meeting between Trump and U.S. technology leaders (Amazon, Facebook, Apple, Microsoft, Alphabet, SpaceX, Tesla) say the meeting emphasized his vision of keeping and creating jobs inside the U.S.
- As CNN Tech reported, Trump said: “My administration is going to work together with the private sector to improve the business climate and make it attractive for firms to create new jobs across the United States from Silicon Valley to the heartland.”
Early Corporate Responses
Already, U.S. companies appear to be responding to Trump’s direction on jobs.
- Ford recently killed plans to build a $1.6 billion auto manufacturing plant in Mexico.
- Sprint announced plans to add 5,000 jobs in the U.S. (backed by a planned $50 billion U.S. investment by SoftBank Group founder Masayoshi Son).
- Amazon said it will create 100,000 jobs in the U.S. by 2018.
- Apple has reportedly been talking with two Asian contract manufacturers (Foxconn and Pegatron) to move work into the U.S.
From Offshore to Domestic Outsourcing
The president’s clear position favoring U.S. job creation will certainly accelerate a slow swing of the pendulum from global offshore toward U.S. domestic outsourcing, which we believe has been underway since 2013 and which we first wrote about three years ago.
Four Key Drivers of the Shift
Innovation
The extraordinary pace of technology innovation and digitalization over the past decade has U.S. companies now looking to cultivate and secure pipelines of future technology and business management and leadership talent.
Development and Delivery
Approaches to developing and delivering new digital products, services, and capabilities have changed dramatically (think: Agile, bimodal). These methods, which emphasize rapid iteration and constant collaboration, are simply less easily executed across great distances, multiple time zones, language, legal, political, trust/transparency, and other cultural boundaries.
Economic Factors
Labor market conditions have evolved in many traditional outsourcing markets for U.S. technology and other jobs, with strong economic growth exerting upward pressure on wages, increasing delivery risks associated with tightening talent markets, and rising turnover rates.
Cost and Risk
U.S. companies have learned that managing large, complex engagements offshore often comes with hidden and unanticipated costs and risks—such as added costs associated with rework, travel, and expensive resources needed to manage, supervise, and quality-check work being performed offshore. These hidden factors underscore the risks of offshore outsourcing.
Expert Insight: Hidden Costs of Offshoring
In a recent interview with USA Today, Genesis10’s CEO Harley Lippman noted that companies often cut jobs in Technology because they think they can do the work cheaper offshore. “It’s purely a cost issue, but it’s not always true,” Lippman said, noting that sourcing IT work offshore often requires hiring project managers, business analysts, programming analysts, and so forth just to manage it all. “You have to hire people here to manage people offshore. That’s an extra cost. No one realizes there are direct and indirect costs.”
Expect Acceleration
If the pendulum was already swinging from offshore to domestic outsourcing, there are plenty of reasons to expect the trend to accelerate now that Trump has been sworn into office.
Trade and Geopolitical Uncertainty
There are the president’s provocations around trade, including threats to impose 35–45% tariffs on imports and to crack down on currency manipulations and intellectual property theft. Add to this the president’s apparent willingness to upset delicate political balancing.
Visa Programs Under Scrutiny (H‑1B)
The president’s public stance on H‑1B visas could present additional difficulties on wages and access to technical resources. A new Wall Street Journal article reports that a draft executive order now under consideration calls for the government to scrutinize a range of visa programs, including the H‑1B program, to ensure they protect “the jobs, wages and well-being of United States workers.” The WSJ article notes that three Indian outsourcing firms alone brought in some 12,000 technology workers on H‑1B visas in 2014—compared to around 2,000 by Microsoft, Google, and Apple combined.
Q&A
What does the article mean by a shift from offshore to U.S. domestic outsourcing?
Answer: It refers to companies moving work that had been sent to overseas vendors back to providers or teams located in the United States. Rather than relying on offshore partners, firms are increasingly favoring U.S.-based outsourcing or reshoring to capture benefits in innovation, collaboration, and risk/cost control.
What are the main reasons companies are pivoting toward domestic outsourcing?
Answer: Four forces are driving the shift: (1) Innovation—companies want to build and protect pipelines of future tech and leadership talent; (2) Development/Delivery—methods like Agile and bimodal require rapid iteration and constant collaboration that are harder across time zones and cultural/legal boundaries; (3) Economic—tight labor markets and rising wages abroad increase delivery risks and turnover; and (4) Cost/Risk—hidden costs (rework, travel, oversight, quality checks) often erode the savings expected from offshoring.
How do Agile and other modern delivery approaches complicate offshoring?
Answer: Agile and similar models depend on close, continuous collaboration, fast feedback loops, and frequent iteration. These are more difficult to execute across long distances, multiple time zones, language differences, and differing legal/political contexts, making U.S.-based teams and partners more effective for speed and transparency.
What hidden costs and risks can undermine the economics of offshoring?
Answer: Beyond headline labor rates, companies often incur added expenses for rework, frequent travel, and U.S.-based resources to manage and quality-check offshore work (e.g., project managers, business analysts, programming analysts). As Genesis10 CEO Harley Lippman notes, firms frequently underestimate these direct and indirect costs, which can offset expected savings.
How might Trump-era policies accelerate this trend, and how are companies responding?
Answer: Tougher stances on trade (e.g., potential tariffs, IP protection) and scrutiny of visa programs like H‑1B could raise offshore risks and limit access to lower-cost technical labor, pushing more work onshore. Companies are already signaling movement: Ford canceled a planned Mexico plant; Sprint announced 5,000 U.S. jobs tied to major investment; Amazon committed to 100,000 U.S. jobs by 2018; and Apple reportedly discussed U.S. production with Foxconn and Pegatron
