Offshore outsourcing: Off the mark

As hot as the outsourcing trend has been, there appears to be a bit of an expectations gap regarding the performance of this strategy. According to an A.T. Kearney study, 60 percent of companies that send operations offshore fail to meet their operational objectives. More than a third (34 percent) fail to meet their savings expectations. The study of multinational companies also revealed that those with a focus on overall performance rather than cost were the biggest winners, saving 3.5 times more money than companies that offshore simply to cut costs. In fact, companies that improved on at least three out of six operational performance areas experienced average savings of 44 percent from offshoring, while companies that improved on two or fewer measures saved only an average of 30 percent. The study found that companies achieved greater savings and better operational performance improvement when they offshored medium-complexity processes such as IT and advanced BPO functions. Low-complexity functions (such as call centers or transaction processing) that were sent offshore saved an average of 28 percent in costs; medium-complexity functions saved an average of 38 percent.

For more on outsourcing:
- read about the study in CIO Article