Clients Are Starting to See Outsourcing's Yoga Benefit

Flexible_yogaSaving money continues to be the top reason many businesses outsource IT services and business processes. It might not be the smartest reason – in fact, if that's the sole motivator for a Nearshore project, it could mean nothing but trouble ahead – but it still pops up at the top of many executive surveys.

But there's another benefit that more decision-makers are now citing more frequently: Flexibility. Yes, just like practitioners of yoga, they see value in being more bendy.

Nearly 70% of the executives questioned for the 2011 Corporate Client Survey said moving work offshore allows them to be more flexible and better poised to adapt to business conditions.

The survey is conducted by the Center for International Business Education (CIBER) and the International Offshoring Research Network Project at Duke University's Fuqua School of Business.

According to Arie Lewin, CIBER director and international business professor at Fuqua, "For companies that are engaged in offshoring, we've seen a significant jump in the number of respondents who say offshoring activities have led to improved organizational flexibility, from 48 percent in 2009 to 66 percent in 2011."

"As U.S. firms increase the scale and scope of their global sourcing, they are laying the foundation for achieving far-reaching organizational flexibility," Lewin says in a press statement. "They say that with these capabilities, they can redesign processes, enhance efficiencies, improve service quality and enable more effective access to new markets and promoting innovation."

Lewin also says "cost savings are no longer the primary driver" of sourcing strategies.

An earlier survey by Capgemini found similar results, where 60% of executives said outsourcing can make a business more agile. This is not really surprising. What is surprising is that in the Fuqua survey of just two years earlier, only 48% said offshoring had increased their company's flexibility.

You might wonder what was going on with the outsourcing relationships of those clients who did not feel more flexible. Did they manage them poorly? Did the provider cause so many problems that the client spent too much time fighting fires? Either of those is possible. There's no lack of experts who say offshoring can backfire and result in less flexibility to respond to market changes. But I want to talk to some of these clients who've said operations were stiffened rather than made more nimble by outsourcing and find out why they feel that way.

Did the company outsource work only to enhance the bottom line and in the process cut the innovative talent needed at home to respond to business conditions? Did management not even think about flexibility when defining its reasons for outsourcing? Is the company run by a bunch of inflexible penny-pinching bureaucrats? More on all this after further investigation.

One other result from the Corporate Client Survey that's important to highlight: US businesses are still preferring to keep their sourcing relationships at a distance. Says Duke's summary of the survey: "Latin America is emerging as a favored global sourcing site, but U.S. companies have yet to find operational or financial advantages in moving well-established and high-performing far-shore operations to near-shore locations."

That "have yet to find" part is also something that deserves further investigation.