Offshoring as a business tool
I regularly check the online landscape for news and views (nothing new, most of us do it right?). During a recent scan, I came across an interesting ZD Net article titled “Offshoring -- just another business tool?” that resonated with views on attempting to find the sweet spot where the interests of business and technology converge.
I couldn’t agree more with the author’s assertion that offshoring isn’t just about cost cutting “Certainly not the businesses which took the plunge into offshoring focused purely on cost-cutting. ....A July 2006 report from industry analyst Gartner, ‘Factors that influence the effectiveness and levels of offshore service’ revealed that such a narrow cost focus didn’t deliver the benefits that companies predicted.”
This is a topic I also explored in my book in the section `“Trends in Offshore IT Outsourcing.” The fact is that offshoring that began as a “low cost” tactic for staff supplementation by IT managers is morphing into a strategic option available to business planners and technologists. Most large software service companies and consultants have published “top 5” and “top 10” reasons for outsourcing but the key drivers include:
1. Limited Talent Pool
2. Cost Pressures
3. Innovate vs. Sustain
Of the three drivers, the innovate-versus-sustain dilemma [Figure] stands out because it is the least discussed. This a challenge managers face when reacting to innovations in the technical and business landscape; while they need to ensure that the limited resources and talent pool at their disposal manage and support the various Line of Business [LOB] applications, managers also need to ensure that innovations are leveraged to the extent possible. Offshoring is a key option available to take on the Innovate-versus-Sustain dilemma. By sourcing the non-core work to specialist vendors, IT managers and their teams can focus on innovations in their space and work towards capitalizing them. The cost benefit from sourcing accentuates this argument.
In a way, advantages of offshoring also drive towards cost-benefit argument.. Business activities are about making money. Cutting costs are definitely a driver in ensuring better ROI (Return on Investment) for the stakeholders (owners).
Comments
I think thats very well put. Innovate or you don't survive, thats the mantra today. And the cost of innovation is what needs to be managed and this is what will put you apart from others. More and More CxOs worldwide are recognizing that offshoring is now a fundamental part of their business goals.
Posted by: Prashant Deorah | September 9, 2006 04:14 AM