Offshore outsourcing -- the growing practice of U.S. companies moving jobs abroad, where foreign workers cost much less than American ones -- has been in the news a lot, with people taking rather passionate positions for, and especially against, it.
You may imagine American firms taking out ads in international newspapers, looking for hundreds or thousands of workers, but that's not how it typically works. Instead, there are a host of companies, many of them public, that provide outsourcing services.
For interested investors, here's a roundup of some of the main players, along with their market capitalization and recent price-to-earnings ratios:
| Company name | Market cap. | P/E ratio |
|---|---|---|
| Infosys (NASDAQ:INFY) | $11.2 B | 37.4 |
| Wipro (NYSE:WIT) | $10 B | 51.3 |
| Satyam Computer (NYSE:SAY) | $3.4 B | 43.0 |
| Cognizant (NASDAQ:CTSH) | $2.9 B | 55.0 |
| Syntel (NASDAQ:SYNT) | $1.1 B | 28.2 |
These firms are engaged in doing work for the likes of Home Depot (NYSE:HD) and Boeing (NYSE:BA).
If you're suddenly thinking to yourself that while you may not like the idea of outsourcing, you could actually make it work for you to some degree by investing in it, you're right. But you should only do so at the right price. Many outsourcing companies, including those listed above, are sporting rather rich valuations right now, as they're seen as hot.
A good strategy for would-be investors is to take time to learn more about this industry and its players, identify those firms that seem most worthy of your dollars, and then wait for the right opportunity to invest in them.
In the meantime, note that offshore outsourcing has become such a hot button these days that president-wannabe John Kerry has accused American firms that engage in it of being "Benedict Arnold" companies, while Congress considers restricting the practice. Meanwhile, according to The New York Times, "Secretary of State Colin L. Powell, in New Delhi last week, assured Indians that the Bush administration would not try to halt outsourcing of high tech jobs to their country."
Back in the corporate realm, companies that engage in offshore outsourcing are becoming increasingly quiet about it, having their names removed from lists of clients on the websites of outsourcing companies, and opting not to issue press releases promoting the millions of dollars they're saving.
Stay tuned to see what happens next as the outsourcing world turns. And discuss the topic on our discussion boards -- there's a free 30-day trial available right now.
Longtime Fool contributor Selena Maranjian owns shares of Infosys.
