Understanding the risks of offshoring in today’s digital marketplace


Offshoring, the approach many U.S-based companies take to secure IT talent, has lost much of its original appeal. In the past, U.S. companies sent IT jobs overseas for one key reason: to capitalize on inexpensive labor. In many cases, offshore vendors claimed hourly rates that were 80% less expensive.  IT leaders, originally seduced by offshoring’s attractive bottom-line savings, quickly found out that offshoring’s challenges and risks often increased project costs, eroding the much anticipated savings. A few of these risks include:

  • Time zone differences
  • Language compatibility
  • Cultural barriers
  • Domain expertise
  • Employee turnover
  • Geopolitical risk

IT leaders, now familiar with the risks associated with offshoring and its eroding potential savings, are replacing offshoring with a proven alternative to talent acquisition: domestic sourcing or onshoring. Domestic sourcing taps into talent inside the United States to deliver the speed to market and responsiveness IT organizations require in today’s digital marketplace. In addition, it leverages a deep familiarity of complex business problems, a depth and breadth of capabilities, access to a scalable brain trust, efficient collaboration, and attention to quality. However, determining the value of domestic sourcing has been difficult to illustrate. Today, companies can utilize the Rural Sourcing TCO Calculator, a robust tool that enables the customization of six distinct and commonly accepted productivity factors to a company’s current situation. This allows for a more accurate assessment of their total cost of ownership of outsourcing needs.

A key advantage to domestic sourcing however, is its ability to deliver the agility needed to pivot IT priorities in response to changing customer expectations. It allows companies operating in this hyper-responsive digital environment to add and recast IT talent as needed. For example, this agility was recently demonstrated when one of our FinTech software clients asked Rural Sourcing to refocus our existing team and add a second scrum team to meet the regulatory demands of one of their largest clients. Taking a flexible approach allows IT teams to adjust project priorities and delivery timelines on the fly – based on the actionable recommendations that come from real-time analysis of customer expectations.


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Comments


  1. Steven Gordon, PhD says:

    No mention of the single biggest risk of offshoring – loss of intellectual property. Software is executable knowledge.

    If the business is investing no intellectual property into a software development project, then what is the point. You might as well buy off the shelf if there is no critical business knowledge being imbedded.

    If the business is investing in intellectual property, that is the main value of the software. Why risk getting that value stolen just to save a measly 10% at most when all the chidden costs are accounted for.


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