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Monday, August 01, 2005

Offshoring: The Bottom Line

Global reality or global fallacy? A new report implies that the perceived benefits of offshoring are false:

Nearly half of the survey respondents say cost savings did not materialise as a result of outsourcing and 70 per cent had a "significant negative" experience. The argument against outsourcing is backed by a finding in the report that, in the past eight years, 38 of 50 randomly selected outsourcing deals had problems resulting in litigation or termination.

From a sample of 50 problem deals, 74 percent failed because of vendor under-performance and cost overruns, the Deloitte study finds.

Other issues raised in the study include 10 percent of participants experiencing confidentiality and intellectual property rights violations. One respondent found its vendor selling its software to other clients.

More than half of the study's participants rank cost-related issues as the main risks of outsourcing. About 60 percent say the contract required more management efforts in comparison with original estimates and 81 per cent say transparency of vendor pricing and cost structure was limited or non-existent, resulting in additional costs.

Cost overruns, additional management cost, under-performance, intellectual property theft... Sounds great. Where do I sign? Corporate America, wake up, before it's to late. The American tech worker is not the only loser in the New Global Economy.

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