Offshoring Not a Panacea for Businesses

Inc’s article “Cost-cutting: Offshoring isn’t Such a Sure Thing,” highlights the downside of using contractors in other countries to reduce work and costs for businesses.

Offshoring may be one way to reduce costs, but companies report that it can cause problems as well as solve them.

A survey by Chicago based DiamondCluster International (now Diamond Management & Technology Consultants) found that the number of executives satisfied with outsourced IT vendors plunged 17 percentage points in 2005 compared with 2004 – the first decline since 2002.

Early termination of relationships between buyers and offshore service providers soared 51% in 2005, double that of 2004.

Delays in resolving customer issues topped the list of reasons for the dissatisfaction with offshoring.

Despite the growing level of dissatisfaction with outsourcing, 74% of participating companies said they planned to increase IT outsourcing in 2006 by reducing their domestic workforce and increasing overseas spending.

Building a stronger business means managing costs and that may mean offshoring. Before you make a move, however, thoroughly weigh the risks involved.