Offshoring grows up

The next generation of outsourcing sees multishore arrangements being made with more nuanced and strategic goals

The word offshoring still causes some IT professionals to break out in a cold sweat and others to reach a low boil. Debates continue to rage on the merits and morality of getting technology work done by non-Americans for wages lower than those of their U.S. counterparts. But meanwhile, the practice of offshoring has not only become more prevalent, it has also begun to mature.

Call it Offshoring 2.0. The corporate view of this practice is evolving from the relatively simple idea of moving commodity work from the U.S. to (usually) India with the hope of reaping cost savings, to much more complex, multishore arrangements with more nuanced and strategic goals. These include achieving variable staffing capacity, freeing internal resources, finding the best talent, increasing speed to market and enabling follow-the-sun support.

In effect, offshoring has grown up. In its infancy, just a handful of adventurous companies sent highly codified work overseas. During its rebellious adolescence, it stirred a furious national debate, and the practice's previously unrecognized management challenges and hidden costs came to light. Now it's poised to enter a less tumultuous young-adulthood. At this stage, there is less mystery, and the benefits and pain points are better known. This enables companies with some experience to approach offshoring as part of a broader strategic sourcing strategy rather than in a tactical, one-off way.

"The 'not built here' mentality has really dissipated," says Danny Siegel, director of data warehousing and business intelligence technologies at New York-based Pfizer, which uses several outsourcing providers. "With budgets shrinking and requirements growing to improve quality and timeliness, there's a lot of pressure on IT management to really rethink how they source for technology projects."

It's reached the point, Siegel says, "that I couldn't care less if the people come from Chennai, Shanghai, Poland or the Ukraine -- that's irrelevant. As long as it's a high-performance work team that gets the job done at a competitive price, great."

Siegel considers it the job of the service provider -- whether based in the U.S. or India -- to provide him with the best and the brightest, whether onshore or offshore, "and that means global sourcing," he says.

Changing the name

Indeed, terms like global sourcing and strategic sourcing are starting to replace offshoring for companies striving to fit their use of overseas talent into their overall business strategies. And offshoring is no longer solely about cost. For instance, Siegel has occasionally requested that his outsourcer assign specific developers from other countries to a given project because he's gotten to know and respect their work on other projects. "These are people who came up through the ranks and ended up being real stars with functional experience," he says. "Seven years ago, that never would have happened. It took time for them to obtain the institutional knowledge and, based on that, move upstream."

Tim McCabe, director of IT strategic sourcing at Delphi, has also moved beyond cost-only goals when selecting a services provider. In fact, his title is a new one for Troy, Mich.-based Delphi. "It reflects a change of approach from sourcing as a tactical commodity to a much more leveraged global perspective," he says. "It's about the best way to get business done, whether it's offshoring, outsourcing, resourcing or insourcing, as well as a broader view than just, 'What's the lowest price that I can pay for a service or commodity?'"

Delphi's strategic sourcing approach does not explicitly require an offshore footprint, McCabe says. At times, he might contract with a domestic outsourcer that chooses to use offshore workers as part of its service. Other times, he explicitly chooses an offshore provider, but for reasons beyond cost.

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