Outsourcing and Offshoring Market Continues to Expand

ThomasNet Industrial News (Leybovich) - While the U.S. employment market struggles to stabilize and begin creating new jobs, the global outsourcing and offshoring market continues to expand, with much of the growth shifting to new areas of the world. Survey findings announced last week by Duke University's Offshoring Research Network and PricewaterhouseCoopers (PwC) indicate that demand for outsourcing services is growing rapidly worldwide, with many providers hiring additional staff and investing in new services to meet the projected growth.

According to the new findings, many outsourcing service providers expect to begin new software development and service contracts in the next 18 to 36 months, while the number of outsourcers planning to offer new finance, accounting, human resources and "innovation services" fields more than doubled from last year. Overall, 62 percent of outsourcing providers plan to expand their operations in the near future.

The "Rah Rah" for Outsourcing Continues
Wall Street Journal (Denning) - "Overall, outsourcing is more than a management fad. It fosters rational allocation of capital and growth in global trade. That is preferable to vertical integration driven by fear of supply shortages, which feeds on itself, as more supplies get "locked up," and leads to inefficiencies as the competitive dynamic is removed from the supplier-customer relationship. Apart from persistent rumors he is a myth, it is worth remembering Santa's vertically integrated venture isn't in the business of making profits."

IndustryWeek (Yarusso) - Outsourcing may not always be a sure-fire, can't miss strategy for improving bottom line performance.

• Numerous surveys indicate that anywhere from 17% to 53% of customers have not realized business value / return on investment from offshore outsourcing. (CIO, 2008) 
• "58% of organizations surveyed could not confirm that outsourcing had clearly improved financial performance. 90% of customer organizations didn't accurately understand the opportunity costs of the selection process and 79% of such organizations couldn't accurately identify the internal financial cost of the sourcing selection process. ( KPMG, 2008)
• These and similar findings / comments are becoming increasingly common. Many are beginning to question the value of outsourcing as a strategy and there is a growing sentiment for bringing activities back in house. We believe that is faulty thinking. Outsourcing, done well, is a powerful tool, especially for manufacturing companies. The key is to avoid two critical errors that frequently result in value leakage across the entire portfolio of outsourced good and services. Those errors are...