Question

The cost advantage for offshore outsourcing to India used to be 6:1 or more. It is estimated that once this advantage shrinks to _____ or less, cost savings would no longer be an incentive for U.S. offshore outsourcing to India.

Answer 1

Answer:

1.5 : 1

Explanation:

1.5 to 1, means that for every $1 that an American company spends in offshoring activities in India, it would need to spend $1.50 in the United States to perform the same activity. By offshoring activities, American companies are saving at least 50%.

If this ratio is reduced to less than 1.5 : 1, American companies will not have any motivation to offshore activities to India. Many companies offshore activities because they save money, but if they wouldn't be able to save money, then it is always better to perform your activities at your home country since the economy as a whole benefits.