Outsourcing moves closer to home

"Mexico is a location that understands more about how business is done in the U.S. That culture has a greater understanding of U.S. society than the Indian counterpart does," Schmidt says.

Mumbai-based Hexaware has also selected Mexico for a nearshore location. The company says such locations "allow us to be more responsive to client needs for our niche competencies. Favorable factors such as proximity, a similar time zone with North America and the availability of local talent enable us to offer better value to our clients."

And the nearshoring trend is not unique to the United States. Indian service providers are also looking to establish service centers in Eastern Europe, which could provide the cost benefits as well as overcomes language barriers, for customers in the United Kingdom, France, Germany and other European countries.

"We are constantly evaluating the addition of new locations around the world that will enable us to better serve them," says Shami Khorana, president of HCL America, a division of HCL Technologies in India. "At present, we are the largest Indian employer in Northern Ireland and have recently set up a software development center in Poland. Our China operations commenced in September, and we are evaluating opening other development centers in other parts of the world."

But industry watchers warn U.S. companies that the technical and cultural issues that crop up with Indian offshore providers will remain even if the companies decide to build facilities closer to North America.

"Skills such as project management or identity and access management will never go offshore or even nearshore because of the cultural differences. Indian workers are trained very differently than American workers, even if it is with the same skill sets," says Jeff Northrup, CEO of IT consulting and staffing firm Concord Technology that specializes in global team development. "Because Indian companies will most likely send Indian managers to those locations, I can't see nearshoring fixing the cultural problems inherent in offshoring."

And the creation of outsourcing facilities closer to home doesn't mean U.S. companies will stop sending work overseas to India. More likely, U.S. clients will engage in blended contracts in which the customer-facing processes or services are outsourced to a nearshore location while back-office functions continue to be sent to India-based facilities.

"Indian providers are going to be able to offer a nearshore location in addition to the Indian location," TPI's Schmidt says. "Enterprise companies will be putting a fair amount of thought into which processes they locate where based on the skills available in that location and the customer touch points."

The IDG News Service contributed to this report.