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What Offshore Outsourcing can Offer aside from Cost Savings

by: Sarah Joson

Thursday, March 1, 2012 | Outsourcing News |

In this day and age, there are several reasons business executives choose to outsource IT-related processes offshore. Offshore outsourcing used to be a strategy for money-stricken companies that would want to cut costs. However, as businesses and industries evolve and the once coveted benefits of labor arbitrage start to become monotonous, business owners are now realizing that there is more to the process than just a way to get cost savings.

Stephanie Overby of CIO.com shares some insights on what makes offshore outsourcing a viable solution for many business owners:    

Outsourcing Benefits on top of Cost Savings

The advantages of moving work offshore may have become uninteresting for some as researchers at Duke University have identified that labor arbitrage had indeed lost its appeal after three years.  The same holds true for the studies done by researchers at the Center for International Business Education (CIBER) and the International Offshoring Research Network’s (ORN) Project at the Duke’s Fuqua School of Business.

ORN’s survey findings indicate that the number of corporate leaders who believed that offshoring enabled them to gain better access to a skilled talent pool dropped from 53 percent in 2010 to 40 percent last year. The number of leaders who said that offshoring helped in improving customer service likewise fell from 46 percent in 2010 to 41 percent last year.

According to Fuqua Professor of Strategy and CIBER Director Arie Lewin, those who have been using offshore outsourcing for quite some time lead their companies to becoming more flexible - internally. It was found out that executives who said that offshoring helped boost their organization’s agility increased from 48 percent in 2010 to 66 percent last year.

Also, survey participants made use of delivery models or captives in different locations as a strategy to maximize an operation and avoid issues such as economic and political problems in those countries where they have assigned a specific function. This strategy is said to be 2.8 times more effective in boosting a company’s agility. Enterprise strategy, on the other hand, only has a 1.7 chance of improving organizational flexibility.

Furthermore, Lewin said that companies based in the US are seeing the attributes of outsourcing that can help them remain competitive, and flexibility will definitely prepare them to compete globally especially in new markets.

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