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Face-off for outsourcing and offshoring

Axel Winter | April 3, 2009
What are the factors to take into account in the offshoring and outsourcing model?

Staffing issues

A Deloitte study from 2008 confirms that more then 50 per cent of respondents, who engage in large outsourcing initiatives, highlight the quality of delivery and staffing issues with their outsourcing provider as a key concern. (Why Settle For Less? Deloitte Consulting 2008 Outsourcing Report).

For me, this goes back to my on-site experiences and working for both sides of the fence. Strategic decision-making is important, but we need to consider the tools to achieve success.

It is important to add that in some of the Asian economies, for example in Thailand or Indonesia, offshoring into other locations or even outsourcing does not always generate the same financial benefits as for an organisation in Europe or North America.

Typically offshoring works, based on labour cost differences, which are not applicable in all countries. Other elements of the value proposition are efficiencies through scale of operating for multiple clients and key expertise in specific processes or technologies.

It is rather important to clearly understand the value to be achieved and to develop methods that are aligned with the suggestions above, which means to clearly evaluate the benefits of such a relationship. A pure commercial evaluation will always lead back to the three fundamental IT issues (operational qualities, cost, time to market), but in a rigid contractual framework often preventing the organisation from implementing quick-win strategies, to address these issues.

Some of the organisations I am working with understand the significance of checks and balances, but have no interest in developing such technical and delivery management skills internally and count on external help to fill this gap.

The latter is the reason for me to return into the consulting environment, to focus on supporting organisations taking on some of these challenges. At any rate, I would recommend conducting some on-site visits and take along some internal experts as well. This drives interesting discussions and is a worthwhile experience.

Axel Winter is director financial services and responsible for Deloitte IT Consulting Southeast Asia.

 

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