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A Comprehensive Survey of Offshore Outsourcing
Ventoro 2005 Offshore Outsourcing Report is the result of a survey of executives in North America and Europe who were prime buyers of outsourced services originating from offshore.
By Tracey Schelmetic
Editorial Director, CUSTOMER INTER@CTION Solutions
It�s no secret that offshore outsourcing is a hot topic now. It�s also not difficult to come to the conclusion that there is a great deal of conflicting information in the media: we read about roaring success stories right next to tales of dismal failure. We�ve seen many opinions on the subject, but more often than not, they�re just that�opinions. It�s hard to realize a comprehensive picture of how the business model actually stands and whether it�s working.
A recently released report issued by research and consulting firm Ventoro does an excellent job of cutting through the miasma. The company�s 2005 Offshore Outsourcing Report is the result of a survey of more than 5,231 executives in North America and Europe who were considered prime buyers of outsourced services originating from offshore (3,139 in the U.S.).
Currently, only 19 percent of all companies in the U.S. and Europe are engaging in offshore outsourcing, a number much lower than the public�s perception.
However, when looking at the Fortune 1000, this number jumps to a rather staggering 95 percent. When asked if they planned to create an offshore venture in the future or were considering such a venture, 32 percent of executives responded �yes.�
Some notable findings from the study:
� Offshore outsourcing ventures seldom fail because of a single factor; more often than not it�s a combination of issues.
� Of those companies with existing offshore strategies, 72 percent planned to increase their spending on offshore. Only 10 percent of companies were planning to decrease their spending.
� Most executives, when asked why they pursued an offshore strategy, indicated �cost savings� as the number one reason, and further indicated that they had been pressured to do so by their boards of directors, shareholders and C-level executives.
� For companies that chose not to move business offshore, they indicated it was primarily because of perceived security issues and quality.
� Aggregate estimates of cost savings realized because of the offshore model were calculated between 10 and 19 percent, depending on different factors. These numbers are significantly lower than the numbers that had been expected by the organizations following offshore strategies.
� The report indicates that when offshore outsourcing is done properly, a realistic cost savings rate of about 30 percent is a reasonable expectation.
� One in three executives indicated that they had been forced to move some amount of outsourced work back onto U.S. shores for quality reasons.
The report went on to indicate that when offshore strategies do fail, the primary reasons given for this failure is �unrealistic expectations� and substantial basic problems with the business model that had been implemented.
Information about the full report is available at http://www.ventoro.com .
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Tracey Schelmetic is editorial director for CUSTOMER INTER@CTION Solutions. For more articles by Tracey Schelmetic, please visit:
http://www.tmcnet.com/tmcnet/columnists/columnist.aspx?id=100007&nm=Tracey%2
0E.%20Schelmetic
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