More US companies now opt for offshoring

DURHAM, USA: As cost-cutting becomes the corporate mantra in this trying time, the number of U.S. companies with an offshoring strategy has more than doubled from 2005 to 2008 and very few plan to relocate activities back to the US.

Last year, more than 50 per cent of companies had a corporate offshoring strategy in place, up from 22 per cent in 2005, according a study done jointly by The Conference Board - a global, independent business membership and research association - and the Offshoring Research Network at the Duke University Center for International Business Education and Research.

Sixty per cent of companies currently offshoring say they have aggressive plans to expand existing activities,.

The report, now in its fifth year, said that the globalization of innovation - the major finding of last year’s report - was continuing at an increased rate in all areas of industry. Speed to market and the domestic shortage of science and engineering talent were two key drivers for offshoring projects, it added.

It further said that of all the offshoring/outsourcing projects initiated in 2007, most were related to product and software development.

“Outsourcing innovation in engineering, research and development, product and software development, and knowledge processes makes companies, whatever their country of origin, more competitive by increasing speed to market and compensating for domestic talent gaps,” said Ton Heijmen, senior advisor, outsourcing/offshoring at The Conference Board, and one of the report’s authors.

The survey examined all aspects of offshoring including drivers, risks, location and delivery models, performance outcomes and future plans, for a wide range of companies and industries in the U.S., including financial services, manufacturing, software companies and technical/professional services.

Companies that have implemented a corporate-wide offshoring strategy often report significantly better performance in cost savings, meeting target service levels, improving relations with providers and overcoming internal resistance, Heijmen said.

The study found that small and midsized companies were increasingly sourcing innovation offshore. Many of these companies found it difficult to compete for highly qualified talent domestically. Small companies were also more adept at identifying and accessing new geographical talent clusters (i.e., Brazil, Egypt, Sri Lanka, Russia) and other locations outside of China, India and Eastern Europe.

The survey added that small companies were sophisticated users of web-based collaboration technologies and prefer specialized small providers.

So, is it that America Inc is turning away from Obama's controversial Bangalore-Buffalo comment on outsourcing?