7 Lessons of the Offshoring Pioneers
The need to remain competitive has kept offshoring an essential part of nearly every company's sourcing strategy. The questions that remain are what and how to offshore. Offshore pioneers who have navigated the changing IT offshoring terrain have some answers based on a decade's worth of lessons. In part 1 of a two-part series, we look at seven of those lessons.
Fri, April 19, 2013
CIO — It's been almost 20 years since the first CIOs began sending work offshore--at that time to a nascent IT services industry in India.
Companies in the financial services, manufacturing, high-tech, and telecom industries led the way, but none made a more public splash that GE. So when the poster child for offshoring pioneers announced it would bring some of those IT tasks back home, one might have wondered if it was a sign that IT offshoring was on its way out.
Less than five percent of companies say they are bringing work back onshore, according a recent survey of 400 enterprises by HfS Research and KPMG. In many cases, companies are sending more--and more complex--IT tasks offshore, says Jimit Arora, vice president of IT services research for Everest Group.
"I can't think of a single company that has less offshore work today than it did 10 years ago," says Esteban Herrera, partner with outsourcing consultancy Information Services Group (ISG), "with the possible exception of GM, which has undertaken a large and publicly visible program to bring IT jobs back to the U.S."
"Economic imperative and the need to remain competitive have made offshoring an essential part of nearly every company's sourcing strategy," says Paul Roy, partner with law firm Mayer Brown.
The only questions are what to offshore and how to offshore it.
For answers, we can look to those offshore pioneers who have navigated a changing IT offshoring terrain and amassed more than a decade's worth of lessons about what works--and what doesn't--that often get overlooked.
"Unlike, say technology adoption, where newer adopters are able to bypass previous technology cycles and get to a newer model quickly, in the offshoring market we see the relative newcomers not benefiting adequately from the lessons learned," says Arora. "Outsourcing is a journey but it is not necessary for IT leaders to retrace the path followed by the pioneers."
1. Captive Centers May Not Be Worth It
Many early proponents of offshoring IT set up their own IT delivery centers offshore. Even those that didn't saw that as a goal in the early years of offshoring. Since then, many of those so-called captive centers have been sold or spun off. "There are very, very few new captives being built today," says Herrera, "and many of the ones that are do not sit in India, but rather in Latin America, Eastern Europe, and South Africa."