The report, Thinking Offshoring Through: A Framework for Decision Makers, reveals that unless corporate leaders address the full spectrum of offshoring challenges, underperformance will only grow. And the impact on corporate operations will be significant.
 
The report is a summary of an extensive study The Conference Board is releasing in installments over the next three months, which examines the complex issues surrounding offshoring. It is designed to add reason, substance and perspective to an emotionally charged issue -- one whose sensitivities pose particular challenges to corporate leaders who must reconcile the often conflicting interests of stakeholders.

"Companies now need a comprehensive decision-making framework to help senior executives rationally and systematically assess the risks and rewards of offshoring," says Ton Heijmen, Senior Advisor to The Conference Board on Offshoring and Outsourcing. 

A wide variety of missteps can sink an offshoring effort, according to the report, from poor project management and inadequate communications (to internal as well as external stakeholders) to ill-conceived transition plans. While many companies tend to focus on security risks, a whole host of other risks, both at home and abroad, loom large: reputation/brand, social responsibility, geopolitical, human capital, regulatory and legal. Any one of these can turn once attractive potential savings into a costly endeavor. 

According to the report, in making their decision about where to offshore, companies must consider the tradeoffs of cost, proximity, convenience, time to market and depth of resources. They must survey all of their options in each available market, from the quality of vendors and staff (skills, language, motivation) to the business environment and the availability of government incentives. 
     
"Once a company outsources or offshores, it is on its way to creating a virtual corporation -- a network of companies and operations that must work together and should act as if they were one integrated firm," said Heijmen. "Beyond advanced IT and communications capabilities, this virtual organization requires special approaches to organizational and behavioral management and the coordination of internal and external relationships."

The Conference Board’s Strategic Outsourcing Conference will be held in New York on April 27-29, 2005.

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