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The benefits of outsourcing are obvious, of course; companies can find skilled manufacturing and IT talent in other regions of the world where wages are usually a lot lower. And even as wages have increased globally, outsourcing likely isn’t going away any time soon. Big IT services firms like Accenture, Capgemini, and IBM each have more than 100,000 employees based in India today, for instance. Meanwhile, such developing countries have built major businesses of their own.

But automation, AI, robotics, and other advanced technologies are making it more cost-efficient to operate locally. By using its local development hubs, Fujitsu not only saved Siemens money but also generated a higher profit margin for itself than if it developed the new AI program offshore. “The decision comes down to what assets do we need to win and where do we need to place them,” says Fujitsu’s Tait.

While offshoring can initially appear cheaper, over time it often ends up being less efficient and more costly, according to Bernard Bourigeaud, founder of the IT firm Atos. He says offshoring isn’t a viable solution for sophisticated IT development projects.

For instance, Atos has been managing the visitor accreditation systems for the Olympic Games since 2002. That requires building a private network and connecting thousands of servers from scratch every two years where each Olympics is located to digitally manage everything from recruiting upward of 60,000 volunteers to communicating event results to the world in real time. Trying to do that from afar would be logistically impossible, he says. “For this kind of project, you have to be close to the client because you cannot be late. You have to deliver on time,” says Bourigeaud, who now serves as chairman of electronic payments provider Ingencio and a director on several publicly listed firms.

Indeed, organizations’ development needs are evolving so rapidly that offshoring could become detrimental to business performance. Delays in hiring and training talent, communication issues related to needs and goals, and people leaving often lead to project overruns. “It ends up being less efficient, takes longer, and costs more,” Bourigeaud says.

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Those employees include not just the traditional engineers and STEM talent, but also fine arts, design, and other creative specialists. For instance, Infosys is partnering with the Rhode Island School of Design (RISD) to enlist and train designers at its Providence hub. The company is also the largest hirer from community colleges in the US. “Tech companies never went to RISD to hire talent before,” notes Korn Ferry’s Menon. “But in keeping with the future of work, companies like Infosys are going local much more, and in essence rebuilding their organizations from a people standpoint as well.”

As the world gets more services oriented, hiring design specialists and other nontraditional talent will be required for IT firms. That, in turn, will have implications for how they manage and incentivize talent. “What motivates and engages engineers is different than what motivates and engages humanities talent,” says Menon.

Or, as Arun Bansal, senior vice president and head of Europe and Latin America for the telecommunications company Ericsson, says, “The structure of moving people far away no longer works. It is essential to have partnerships to train local talent and build up nearshore resources.”

For more information, please contact Vinay Menon at vinay.menon@kornferry.com.