Global Sourcing: Offshore Outsourcing and Onshore Options Surge
Outsourcing remains a critical resource for corporate IT. Recent Forrester research reveals that 100 percent of companies outsource at least one IT function and one application development function, CIO reported. What’s more, 97 percent of these organizations allow privileged remote access. With the breadth and depth of technology rapidly increasing — think the Internet of Things (IoT) and big data — many businesses are also expanding their global sourcing efforts in order to stay competitive and free up local IT for critical line-of-business objectives.
But rising consumer expectations, worries about data breaches and increasing government scrutiny have prompted a new trend: a surge in onshore outsourcing alternatives to supplement or replace offshore offerings. Here’s a glimpse into the evolving market.
New Global Sourcing Numbers
A recent Everest Group study found that the percentage of new onshore efforts grew to 52 percent versus offshore service-delivery locations across the top 20 service providers over the last year and a half. What’s more, large enterprises such as IBM, Xerox, Dell and Walmart have all opened new onshore centers in the last 18 months, CIO noted. This is a reversal of recent outsourcing trends — in 2012, two out of three new service delivery centers were offshore. Over 2015 and the first half of 2016, however, 52 onshore facilities opened, with North America and Continental Europe favored for IT and business process services.
The Meaning of the Move
So, why the sudden push for global sourcing that lands closer to home? Part of the answer lies in economic rebounding: Companies were reluctant to invest in higher-cost local alternatives during the lean years of post-housing-crisis America. But that’s only part of the story. Enterprises are also faced with an increasingly complex technology landscape, as well as higher levels of governmental oversight both at home and abroad. Put simply, the laws governing data use and privacy in the United States aren’t universal — data stored offshore may be subject to the regulations of host nations or a mix of legal oversight depending on current political climates and preexisting trade agreements. Staying closer to home simplifies the issue.
And there are other compelling reasons to consider onshore alternatives, including:
- Deeper talent pools. As noted by CIO, lower maturity of tech and service markets offshore can make it difficult for companies to find the required levels of experience and expertise. In addition, staying local helps to ensure service provider certifications and competencies match current needs.
- Customer expectations. While offshore centers may offer lower costs up front, this may not translate to long-term savings. This stems in part from customer expectations: In cases of public-facing service delivery, consumers now expect timely responses to inquiry and the ability to speak with someone who understands local issues and concerns. For back-end offerings, it’s much easier to arrange meetings or training when providers are closer to home.
- Reduced costs. “Tier-two” cities across North American and Europe now offer increasingly competitive pricing thanks to tax incentives and drive to create home-soil jobs. They also come with reduced travel costs if executives need a face-to-face meeting or IT personnel need on-site access to hardware. And for some enterprises, especially those in the health care or financial industries, keeping data local may be mandated by compliance regulations.
Bottom line: Global sourcing remains a top priority for companies, offshore options are being complemented with onshore solutions that increasingly offer a unique blend of talent, customer service and reduced outsourcing costs.