New Study Reveals Changing Trends in Offshoring
August 14, 2007
The offshoring controversy is nothing new in the contact center industry. It is the motivation for the move overseas that tends to change over time. While many organizations began to look to offshore locations in an effort to reduce costs, many companies now are seeking highly skilled and educated individuals that have proven to be in short supply in the U.S. and Europe.
A new study by Duke University and the management consulting firm, Booz Allen Hamilton has found that companies are increasingly moving sophisticated, mission-critical functions to China, India and other offshore locations primarily because these countries are providing the individuals with the necessary skills and education.
This study also found that although companies continue to offshore more high-skilled work, they are becoming more concerned about the loss of managerial control that accompanies outsourcing functions close to their core business.
One key element identified by this study was that the need to source talent globally is replacing low-skilled, low-cost labor as the decisive factor for the majority of organizations’ offshoring strategy. In fact, nearly 75 percent reveal that access to qualified personnel is the most important driver of their offshoring strategy and nearly 70 percent select an offshore location based on the availability of needed expertise.
Concerns regarding offshoring still exist, although they are shifting from external factors, such as political backlash, to internal factors, including the loss of managerial control and the impact on operating efficiency. Overall, companies cited more concern about their ability to manage their offshore activities, while concerns about cultural differences dropped by 50 percent.
India continues to be the destination of choice for U.S. organizations seeking to offshore, while German companies prefer Eastern Europe. Firms operating in Europe reveal a perceived risk due to cultural differences when offshoring, while U.S. firms are primarily concerned with service quality.
Speed to market is an important consideration for organizations looking to offshore, as many believe it can be used to enable faster time to market. In fact, 48 percent of the surveyed companies identified this as a significant driver in their offshoring decisions. Such an approach supports the theory that offshoring is more than just a cost reduction tool; it is also being used as a method to drive strategic business objectives.
The survey also found that small, entrepreneurial companies are more likely than large corporations to initiate offshoring of high-value functions. Nearly half of companies with fewer than 500 employees reported that their first offshoring initiative involved product development, innovation or engineering, as compared to 16 percent for larger companies.
Such findings reveal that although the motivation for offshoring may be changing, it still remains a viable option for many organizations, especially those who are seeking highly skilled individuals to fill specific roles. This trend should serve as a wake-up call for many Americans, indicating that there are good positions to be had with the right education.