Surprising findings on off-shoring

I got an early look this week at a new study from A.T. Kearney:

I got an early look this week at a new study from A.T. Kearney: "Execution is Everything: The Keys to Offshore Success." It's only 21 pages but is one of the most cogent pieces of analysis I have read in quite a while--and, for me, full of surprises. Late last year they company conducted an online survey of leaders of America's top 500 companies. About 50 of the companies provided detailed responses. Here are some of the most interesting findings:

--The companies are consolidating their offshore activities to fewer countries, with the leading candidates being India, China, and Eastern Europe. I thought companies were hedging their bets and parceling out their jobs to even more countries.

--As a group, the 35 surveyed companies that had completed offshore program implementations had succeeded very well. Combined, they saved 49 percent of baseline costs and had net improvements across all six of the study's operational performance measures, including organizational capacity, flexibility, and process maturity. I had been hearing all sorts of stories about off-shoring disappointments.

--In spite of the fact that they succeeded as a group, 60 percent failed to meet their operational performance expectations and 34%filed to meet their savings expectations. So a few of them did so well that they brought up the average.

--The best-performing companies focused on execution. And their primary target was operational performance improvements, rather than savings per se.

--Another key to success was adopting an "ownership mindset"--which means a high degree of focus, of commitment from executives, and persistence.

--Surveyed companies that chose the captive model rather than the third-party model averaged better savings. But those who used third parties and adopted the ownership mindset did well, too.

For people considering off-shoring work to India, China, and elsewhere, I highly recommend this report.

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