From an article at the FinancialTimes.com:

French businesses are becoming sceptical about the cost benefits of offshoring, the practice of moving work to cheaper overseas locations. But companies believe investing in overseas markets can save jobs at home, according to a survey published by the consultants KPMG and Medef, the French employers’ group.

The threat of offshoring is being used by Bosch, the German engineering group, to try to compel workers at a French factory to work a 40-hour week, rather than the the statutory 35. Offshoring is also a bogeyman of the French anti-globalisation movement, which was out in force at the World Trade Organisation meeting in Hong Kong last week.

The survey suggests, however, that the attractions of offshoring are waning. Out of 200 heads of small and medium-sized enterprises, 56 per cent said they saw no benefit in moving jobs to countries with cheaper labour markets, compared with 29 per cent last year.

France has long had labor laws that aren't friendly to business.  Things like the statutory limit of 35 hour work weeks, minimum 5 week vacations, high minimum wages, and other laws have given France chronically high unemployment rates and an anemic GDP growth rate.   Socialist governments always think they are helping out the working class through their restrictive laws, but the truth is that if you make it too expensive to add new employees, companies will only add people to the payroll when there is no other choice.

With conditions such as they are, most people would think that France would be hopping on the offshore bandwagon.  But there is one thing that prevents offshoring from reaching it's true potential in France.  That one thing is language.  As a former British colony, India has a decent supply of people who speak English.  Despite the problems that India is facing in the future, the fact is that at the current point in time, India is still the best low cost labor location for IT outsourcing.

But as I have mentioned before, other countries are looking at India and trying to emulate their success.  When former French colonies in Africa have succeeded in duplicating the Indian model, you will see outsourcing in France start to grow.

From an article at the ChannelInsider.com:

U.S. IT workers got the royal treatment at the height of the dot-com craze, with stock options, bonuses, and the odd sea cruise among other perks.

Such goodies were the stuff of employee retention programs—efforts to keep workers from straying to ever greener pastures. At the time, companies did whatever they could to keep attrition rates manageable. But then the boom ended. Employee status suddenly shifted from "most valued corporate asset" to "lucky-to-have-a-job."

The battle to retain employees has resurfaced once again, albeit in a different geographic theater. The offshoring surge has placed India-based IT services firms on a fast growth track. Companies battle each other to win business, but they also compete to attract and retain talent. India's National Association of Software and Service Companies has reported attrition rates among business process outsourcing companies of 25 to 40 percent.

I believe that history will repeat itself.

The dot-com boom was created by a few separate events.  At the same time internet companies were springing up everywhere with lots of cash and few solid business plans, there was a squeeze for IT professionals caused by the Year 2000 problem and a telecom explosion.  The laws of supply and demand being what they are, people with technical skills enjoyed incredible pricing power for their services.  Desperate employers were even fighting to get people who had no business being in Information Technology.

When you look at honest appraisals of the technology sector in India today, it is obvious that we are seeing a repeat of the late 90's in India.  When the attraction of wage arbitrage disappears, there is little reason for Western companies to offshore work to India.  Contrary to popular media misrepresentations, the work done there is very low level.  Rural-sourcing is becoming increasing attractive.

When the downturn comes (and it will come), it is my opinion that companies like Satyam (who are basing employee retention strategies around career development of employees) will fare much better than companies like Acclaris who think the key to success is creating positions like Chief Fun Officer.