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Offshoring Spreads Its Wings

From East Asia to Eastern Europe, offshore outsourcing is taking off.

Taking the trend to its logical extreme, some Indian companies are even beginning to outsource work to the United States. They are establishing offices and large campuses in an effort to get closer to clients and compete with U.S. rivals. Tata Group, for example, has a call center in Ohio, and Wipro is opening an office in Atlanta. In theory, a U.S. company could offshore its call center to an Indian vendor and end up having its calls handled somewhere in the Midwest, or even down the street.

Says WNS Global’s Kops: “It could be that Reno, Nevada, is the next offshoring hot spot.”

Kate O’Sullivan is a senior writer at CFO.

Staying Put

Despite all that companies on both sides of the Atlantic have learned in the last few years, many CFOs remain cautious about offshoring. More than half of the finance executives responding to CFO’s survey say they have no plans to outsource offshore.

Moreover, 13 percent of those who have done so have failed to achieve any savings. Concerns about quality, intellectual property, and internal controls continue to nag finance executives. Stories of abandoned projects abound; in the past year, a third of companies surveyed by Diamond Management & Technology Consultants canceled an offshore business-process outsourcing deal.

At Agfa, a Belgian-based imaging technology company, executives evaluated offshoring as far back as three or four years ago, but they have been far more focused on operational performance improvements. Tim Coakley, CFO of Agfa’s North American health-care business, says he doesn’t plan to offshore work anytime soon, even though a benchmarking study showed the unit’s finance costs were higher than they should be.

“We wanted to make sure our internal shop was in good order before we considered an offshore provider,” explains Coakley. “We felt that if we gave them less than perfect processes, we would be trading one headache for another.” If anything, he adds, offshoring has moved further down Agfa’s priority list as the company continues to adjust to a major global reorganization.

Another common reservation concerns the ability of offshore vendors to perform higher-level tasks and provide insight into individual industries. “There isn’t really one company that has specific capabilities that would suit our needs,” says Simon Newton, vice president of North Atlantic finance and shared services at Kimberly-Clark. For offshore providers to continue to grow, he says, “they have to start understanding our industry and providing innovative solutions.”

Given the steadily increasing sophistication of offshore outsourcers, that may be just a matter of time. — K.O’S.

CFOs' offshoring practices

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