Offshoring plans not dampened by slowdown

By Ankita Bhalani   |   Thursday, 11 December 2008, 16:03 IST   |    1 Comments
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Bangalore: Companies in U.S. continue to implement their current strategies for offshoring some of the functions amidst the current global slowdown. The financial slump is also expected to hasten any such plans. The study conducted by the Center for International Business Education and Research's Offshoring Research Network (ORN) at The Fuqua School of Business at Duke University and PricewaterhouseCoopers (PWC) on offshoring trends suggest that while cutting costs is the most significant factor driving offshoring decisions since the worldwide financial crisis gained momentum this quarter, many companies showed an urgency to improve efficiencies. The current survey was designed to capture business managers' sentiments in the midst of the current global slump in financial markets and the presidential election. Arie Lewin, Professor of Strategy and International Business, Executive Director, CIBER said, "Our research shows as companies grow the scale and scope of sourcing programs, average efficiency decreases. Enhancing efficiencies has become more urgent in recent months as pressure on margins forces companies to increase productivity while spending less." Companies are planning to enhance efficiencies through business process redesign and by improving coordination and integration of offshoring processes. Hari Rajagopalachari, Executive Director, PWC said, "Companies can't wait long and can't spare resources for redesigning; they want to improve their existing organizational capabilities for managing their offshoring strategies. This will require developing the discipline and the metrics to capture the benefits of existing and planned projects." A more important driver of offshoring, is the need of increasing speed to market for 41 percent of the respondents. On the other hand, renegotiating current contracts with service providers is emerging as a growing concern among companies. 40 percent of companies have pressured or have plans to pressure providers to offer more favorable contract terms in order to trim costs. Further cost-cutting options cited by respondents include delaying large-scale projects that require larger upfront investments and postponing some longer-term development initiatives. Companies said they may realise additional cost savings by lengthening implementation timelines or cancelling or postponing discretionary projects such as software development. While efficiency enhancement and cost reduction are among companies' top priorities, 12 percent of respondents noted they are considering spinning off their captive operations to a provider or have already done so. The study queried nearly 100 firms from U.S. and Europe about their plans to source some job functions and business processes offshore.