In particular, IT organizations often assume that labor arbitrage will yield savings similar to a person-to-person comparison, but this doesn't take into account the hidden costs and difference in operating models. For example, the assumption may be that a full-time equivalent in India will cost 40 percent less. The reality is a general savings of 15 percent to 20 percent during the first year.

As the current offshore outsourcing movement prepares to grow between 20 percent and 25 percent in the next two years, despite initial resistance and geopolitical concerns, key decision-makers should consider a series of risk factors before sending projects/functions overseas. In addition, META Group recommends that executives consider putting a contingency plan in place in case the vendor fails to deliver.

Other offshore risk factors to consider include security (international business issues), scope creep (there is no such thing as a fixed-price contract), culture (cultural education programs), and knowledge transfer (consider productivity decline during the initial transfer of knowledge to the vendor).