Cost savings is not the ONLY motivation for offshoring

Mon, Jul 10, 2006


Since the dawn of offshoring, we have been hearing glorious stories of how companies have improved profitability through cost savings by sending work offshore. Does this mean the benefits are solely limited to cost savings? Not at all – the fact is there are many more benefits to offshoring beyond cost savings than might meet the eye.

A Forrester Research study of 145 U.S. companies found that 88 percent claimed to get better value for their money overseas, and perhaps more importantly, 71 percent said overseas workers did better work. According to McKinsey, companies shipping back-office operations to low cost countries often miss other avenues of improving efficiency. Among these, offshoring lets you work round-the-clock and save money by hiring people instead of buying expensive IT systems. As stated by InfoWorld, offshoring gives you access to highly skilled workers, thereby expanding your talent pool.

“There are cost savings, but there is also a notion of improved time to market for us. That means core product development as well as implementing customer systems,” says Garry Johnson, VP and chief technology officer with Dendrite International Inc.

It’s true that offshoring has provided substantial cost savings and improved profits of companies that sent work offshore. But with increasing competition and alternative sourcing destinations, one cannot assume the same scenarios will continue to be true in the coming years. Offshoring delivers more than labor cost savings when you have a good offshoring strategy that takes into account factors such as exploring new markets for generating revenues and managing risk not possible in home markets, says the online magazine CFO. Read the full story here.

So if cost savings is the only thing that comes to your mind when you hear offshoring, you may need to expand your thinking. Exploring the possibility of offshoring is for those who want to gain a competitive edge which should include everyone!

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