Survey: Offshoring Efforts Largely Successful

A Duke University/Archstone Consulting study shows that 72% of offshore implementations met or exceeded the expectations of companies, according to a press release. Thirty-one percent of companies said they had achieved their service level goals within the first five months, with 55% expecting cost savings of 30% or more per year.

The trend of offshoring looks to continue as well, with the study revealing that offshore implementations are planned to grow by over 50% in the next 18 to 36 months. The reasons for this include cost benefits (with 93% citing this as a reason) and improved service level (56%), according to the survey.

Other findings of the study, which was released at the 2004 National Forum on Trade Policy in Durham, North Carolina, include:

• While IT is the function most often offshored (66%), high value services like finance and accounting (60%), engineering services (44%), and research (32%) are more commonly offshored than transaction-process services like human resources and procurement (24%).
• While India is still the leader (80%) of offshore operations, only 52% of expansion plans with a specified location are being targeted for India in the future. Instead, these jobs will be going to such places as China and other Asian countries, the Philippines, Latin America and Canada/Mexico.
• Paradoxically, while the quality of service is ranked as the No. 1 risk of offshoring, companies are moving offshore to improve their service levels.
• In fact, 75% of participants reported reaching targeted service levels within 12 months, which beats the average domestic improvement effort, according to the survey.
• Less than 5% of companies postponed offshoring plans due to political backlash, with 72% said it had no impact on their decision to offshore.

The study looked at 90 Fortune 500 companies with average revenues of $21 billion.