Offshore outsourcing may not be so cheap

CIOs are facing a fork in the road over offshore outsourcing because a domestic company owning a company in India may not be such a good deal. As CIOs look for ways to save money, owning an outsourcing operation in India seemed like a good plan. But now companies are facing the prospect that it may not be efficient.

It was reported last week that Citigroup Global Services, with offices in Mumbai and Chennai, India, decided to sell the operation to outsourcer Genpact for nearly $700 million. It's already looking like 2008 could be a lean year, and CIOs are looking for ways to cut costs. So this seems an odd choice in the wake of all the cost-savings that offshore outsourcing does provide. Apparently, American companies had unrealistic expectations, according to IT experts. Faced with the reality of rising costs from labor to real estate, companies have been unprepared to tackle the ownership problems they faced. But Cliff Justice, head of globalization for Houston-based outsourcing consultancy EquaTerra, says that most captive centers can be fixed by partnering with local providers and resetting expectations. And that means more hands-on management from the CIOs in the States. Let us know what your experience with offshore outsourcing has been? Is it cheaper, and do you trust it to deliver?

For more on the perils of outsourcing:
- see this CIO.com article