Gartner Says Companies Examining Offshore Outsourcing Options Should Also Consider Offshore Insourcing as a Solution for Their Sourcing Needs
Gartner Analysts Say There is No Set Model for Success in Offshore BPO; Enterprises Will Most Likely Use a Combination of Offshore Solutions for their Specific Goals
STAMFORD, CONN., August 28, 2003 — With the increased interest in offshore business process outsourcing (BPO), enterprises should also examine the benefits from offshore insourcing to determine the right mix of offshore delivery options for them, according to Gartner Inc. (NYSE: IT and ITB).
Offshore insourcing for business processes is when companies set up their own offshore processing centers. A large number of companies prefer to maintain or retain control by "insourcing" their back office functions and business processes by setting up their own captive "shared service centers." Enterprises wary of control and data security issues can benefit from the offshore advantage of "insourcing" offshore.
"The rewards and risks of offshore BPO are just beginning to be understood. As enterprises and service providers evolve, it has become clear that there is no right model for a given company. Instead, enterprises will use parts of a model or a combination of models as they begin to explore and iron out the issues around sending business processes offshore," said Sujay Chohan, research vice president for Gartner. "No enterprise will fully insource or outsource offshore. Most will use a combination of delivery models as they climb the learning curve to BPO."
Gartner analysts said enterprises considering offshore outsourcing for business processes should carefully examine and evaluate their options. Many of the decision criteria regarding insourcing vs. outsourcing in the domestic market also apply to offshore sourcing.
Gartner analysts recommend that enterprises ask themselves the following questions before embarking on an offshore sourcing strategy for business processes:
Why consider outsourcing the function? Is it to focus on our core business, to improve service levels, to benefit from industry best practices or to reduce transaction costs? At the present time, cost is the key driver for offshore BPO, although cost reductions can be achieved via a captive center if the enterprise has a large quantity of transactions. Additional cost reductions can be derived only from a scalable, multiclient operation.
What processes are being evaluated for outsourcing? Some organizations have begun to achieve end-to-end BPO, achieving results through process transformation and automation. Repetitive, transaction-intensive processes are the best choices for offshore outsourcing. Many enterprises considering sourcing end-to-end business processing do not want to give up control of the process because of strategic and security concerns. In this situation, offshore insourcing or captive-shared service centers are viable options.
How well is the function being performed today? The answer to this question depends on the availability of process measurements inside the enterprise. If you find, at the end of the measurement study, that you have achieved better-than-industry benchmarks, offshore insourcing is a good option. If the process performance is less than average, outsourcing might be a better option.
Additional information is available in the report Offshore Insourcing vs. Offshore Outsourcing. This report examines the benefits of offshore insourcing for enterprises that are wary of offshore outsourcing. This report can be purchased on Gartner's Web site.
More information on the industry is available in Gartner's IT Sourcing and Procurement Directors Membership Program. Gartner has launched a program that brings together expertise from across Gartner focusing on outsourcing, sourcing and procurement in a convenient, integrated package tailored specifically to the business and technology issues facing sourcing and procurement executives - whether focused on strategy, evaluation and selection, contract negotiation, or management.
The Gartner IT Sourcing and Procurement Directors Membership Program will help executives increase the visibility, reputation and success of IT sourcing or procurement initiatives. It will also enable executives to respond more efficiently and effectively to the multitude of demands typical in the current time, budget- and resource-constrained environment. For more information,visit www.gartner.com/mp/ITSP, or call Gartner at 203-316-1277.
To keep up to date on the latest outsourcing issues, please visit Gartner's Outsourcing Web site at www.gartner.com/outsourcing. This Web site offers content, tools, products and services that are needed to make effective, strategic decisions about outsourcing. When browsing the site, users receive a breakdown of key outsourcing issues, industry trends, and best practices for making smarter business decisions. This area also includes relevant research and links to Consulting and Measurement services. Custom Alerts are also available, enabling users to stay current on new research focused on their outsourcing agendas. Free copies of the Gartner outsourcing handbook, Outsourcing: The Real Deal, can also be ordered on the Outsourcing Web site.
About Gartner:
Gartner, Inc. is the leading provider of
research and analysis on the global information technology industry. Gartner serves more
than 10,000 clients, including chief information officers and other senior IT executives
in corporations and government agencies, as well as technology companies and the
investment community. The Company focuses on delivering objective, in-depth analysis
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visit www.gartner.com.
