The New World Order: Offshoring Today

Companies are looking at using offshore facilities for different capabilities, often those that do not require spoken language. Take knowledge processing outsourcing (KPO). KPO often is used to help companies enhance or create abstracts, edit scientific manuscripts, and research and analyze legal briefs. Popular in India currently, the industry is expected to reach $16.7 billion in revenue in 2010-11 (which is equivalent to an annual growth rate of 39 percent during the next four years) and to employ approximately 350,000 professionals globally, according to a recent report by research firm Evalueserve.

"Globally, we can go and get help today from anywhere, as long as you have a methodology," says Evalueserve chairman and co-founder, Alok Aggarwal. He adds that prices are significantly lower for KPO services offshore: "A research report might cost $10,000 to $15,000. That's 50 to 75 percent less than in the United States."

Those are tasks that do not require interaction back in the United States, where language barriers have long been a thorny issue. What's new, however, is that sometimes, language issues can be solved by outsourcing.

"We have call center service in Guatamala now," says Todd Cameron, head of Capgemini Group (VARBusiness 500 rank: 7) AOS Service Delivery Management. "Price plays into it, but we did it also because there is a growing Spanish-speaking population in North America that we can service this way."

An early offshoring benefit for some companies was the ability to work round the clock. But that 24/7 system doesn't work for every business. If you need to interact with employees, time zone differences are hugely inconvenient. For an asynchronous process, increased productivity results, for a synchronous process, frustration is the end product. For that reason, along with the language benefits, Latin America is increasing in popularity among firms choosing to offshore. Companies get a large, educated workforce at a low price point, and in the same (or very close) time zone.

"Our centers in Latin America speak Spanish and Portuguese. Our new center in Mexico serves not only that country but also U.S. businesses that have a need for Spanish-language services," Bagchi says. "It can also serve as a 'near-shore' center for U.S. companies because of its English capabilities, and it is in a more favorable time zone than our centers in India."

End Game

Though companies are still in the offshore game, there is no question they are evaluating how and why they are going about it. Cost gains are slowing, and, in response, companies are looking to new locales. According to a recent report from Diamondcluster, a majority of offshore buyers (64 percent)—remain committed to increasing their purchasing, but those numbers represent a significant decline from prior years.

The past decade has seen the offshore trend evolve from primarily one the enabled massive cost cutting to one that provides maximum flexibility. VARs are using offshore centers can provide their customers round-the-clock service, language-specific services and global presence. Moving forward, offshoring will seen as one of many tools in a company's quest for profitability; other companies may choose to hire fewer employees in-house. Those requiring a global footprint may also opt for offshore capabilities.

Though the reasons for it are changing, offshoring certainly is here to stay. According to Plunkett Research, global outsourcing revenue this year will hit $450 billion; seven percent of that will comprise contracts worth more than $1 billion. In a constantly growing marketplace, it seems global opportunites are boundless.

The key is to leverage resources most effectively, whether that means heading offshore or hiring in-house. "It's a business decision as to how you cultivate relationships. Fortune 200, high-end companies, can be wildly successful chasing cheaper labor," BlueWolf's Kirven says. "But midsize companies [may not] see the risk worthwhile."