Magazine article Business Credit

Companies Considering Offshoring Must Carefully Weigh Risks vs. Rewards

Magazine article Business Credit

Companies Considering Offshoring Must Carefully Weigh Risks vs. Rewards

Article excerpt

Most experts see no end in sight to the offshoring trend, as growing numbers of companies seek the cost savings and competitive advantage offshoring promises. But with an estimated half of all offshoring operations destined to fall short of expectations, companies are under increasing pressure to calculate the risks--not merely the rewards--that offshoring entails, according to a report released today by The Conference Board. The report, Thinking Offshoring Through: A Framework for Decision Makers, reveals that unless corporate leaders address the full spectrum of offshoring challenges, underperformance will only grow--and the impact on corporate operations will be significant.

WHERE DO COMPANIES TYPICALLY GO WRONG?

A wide variety of missteps can sink an offshoring effort, from poor project management and inadequate communications (to internal as well as external stakeholders) to ill-conceived transition plans. While many companies tend to focus on security risks, a whole host of other risks, both at home and abroad, loom large: reputation/brand, social responsibility, geopolitical human capital, regulatory and legal Any one of these can turn once attractive potential savings into a costly endeavor.

The ultimate success of offshoring operations depends on successfully analyzing the full spectrum of implementational and operational factors--location, process, scope, participating business units, etc. …

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