Many technology outsourcing decisions are just a matter of simple arithmetic: The average salary of an Indian computer programmer is $7,500, one tenth that of his or her U.S. counterpart.

But experience is teaching some decision makers that other numbers don't add up so easily. Take, for example, the 12,000 miles and ten time zones separating New York and Bangalore.

"A lot of our businesses are very localized," notes Terry Bourne, chief operating officer of Penson Financial Services Canada, a subsidiary of Dallas-based brokerage services company Penson Worldwide. "If you're in North America, do you really want to send a lot of work to India, and how economical would that really be?"

Sometimes, Bourne argues, you don't have to go halfway around the world to find the desired cost efficiencies.

"We talked to a U.S. investment bank about outsourcing back-office services to us in Canada," says Bourne, who is based in Toronto. Figuring in currency values, tax incentives and the logistical advantages of proximity, Canada was competitive with India.

Bourne isn't revealing the name of the U.S. firm or whether he has closed the deal. Other considerations could yet tilt in favor of India or another offshore venue. But an alternative to long-distance outsourcing -- nearshoring -- has sprung up, and even the stalwarts of the Indian technology industry acknowledge its merits.

In some cases, "India may be too far," concedes N.G. Subramaniam, head of the banking industry practice of Bangalore-based Tata Consultancy Services, which increased revenues 44 percent, to $1 billion, in the six months ended in September. Tata clients' work may be farmed out to nearshoring sites in Brasília, Budapest, Phoenix or Toronto.

Tata is facing reality: Stamford, Connecticut, research firm Gartner forecasts that India's 80 percent share of the estimated $10 billion global outsourcing market will be cut in half over the next three years as customers seek out other low-cost locales.

As Bourne's flirtation with the investment bank indicates, nearshoring is just starting. Bethpage, New York, insurance company Robert Plan Corp. last year turned portions of its core processing and help-desk operations over to Montreal-based computer services company CGI Group. "We didn't have the risk appetite to go completely offshore," says Robert Plan chief information officer Edward Ranko.

Another CGI customer, Tacoma, Washington­based investment manager Frank Russell Co., gets tech support from facilities in Regina, Saskatchewan.

If Canada -- where programmers with two to three years of experience are paid the U.S. dollar equivalent of $25,000 to $50,000 a year -- can sell nearshoring, then Mexico looks even more attractive. According to NeoIT, a San Ramon, California­based consulting firm, those same programmers in Mexico cost $18,000 to $23,000 apiece.

Mexican developer Softtek landed a contract last year to upgrade the back-office trading system of an undisclosed large New York­based financial institution. The firm is using programmers at Softtek development centers in Mexico City and Monterrey.

Azertia Group, a technology company owned by two Spanish concerns, banking giant BBVA and power company Iberdrola, is trying to convince U.S. banks, including the parents of Mexico's Banamex (Citigroup) and Banco Santander Serfin (Bank of America Corp.), to use its data center in Mexico City. Jerry Williams, COO of Peekskill, New York­based Azertia USA, sees pent-up demand for nearshoring and says that his company's Spanish-speaking employees can help U.S. banks in their marketing to Hispanics.

In one set of numbers, however, both Canada and Mexico fall short: Their schools turn out 30,000 and 20,000 programmers a year, respectively, well below India's 150,000. At that rate, India may always be better prepared to take on the biggest jobs, or what Girish Paranjpe, president of the financial solutions group at India's Wipro Technologies, calls "mainstream functions."

Notes Paranjpe: "I'd worry that Canada will become saturated and costs will go up. But it may be fine for special needs or projects."