The Handbook of Global Outsourcing and Offshoring

Co-authored by Julia Kotlarsky.

By end of 2009, Information Technology outsourcing (ITO) revenues exceeded US$ 250 billion while those for business process outsourcing were more than US$ 140 billion. The revenues from offshore outsourcing of business and Information Technology (IT) services exceeded US$ 60 billion, and over the next five years the compound annual growth rate for offshore outsourcing is expected to be about 20%. By 2006, over 200 firms from the Forbes 2000 companies and nearly 50% of the Fortune Global 250 had offshored IT and business process activities. In 2008 India posted some 65% of the ITO and 43% of the Business Process outsourcing (BPO) market (Willcocks and Lacity, 2009).

It is common to talk of Brazil, Russia, India and China as the BRIC inheritors of globalisation, offering both offshore IT and back-office services, and also, with their vast populations and developing economies, huge potential markets. In 2008 India exported US$ 40 billion of such services, while China, Russia, and Brazil managed US$ 5 billion, US$ 3.65 billion, and US$ 800 million respectively. But the phenomenon of offshoring and offshore outsourcing is certainly expanding, with, on our count, some 120 centres developing around the world. Therefore it has become increasingly important to understand the phenomenon, not least as a basis for suggesting what directions it will take, its impacts, how it has been conducted, and how its management can be better facilitated.

These points are particularly pertinent because recent evidence has suggested that a number of offshore outsourcing relationships and offshoring projects have failed to live up to some of their promises. The reasons for this are many, ranging from poor quality delivered by vendors to rising management costs that result in frustration and disappointment. Collaboration between remote sites and the ability to share and transfer knowledge between dispersed teams have also been mentioned as imperative to successful offshore outsourcing projects. In addition, our own research highlights certain capabilities that vendors and clients should develop, the governing structures that they need to put in place, and the bonding activities that they need to promote and make time for.

While offshore outsourcing brings its own distinctive issues, it is the case that the principles for running any ITO/BPO venture also continue to apply to offshoring and offshore outsourcing arrangements. However, offshoring is increasingly part of most deals of any significant size, so it becomes very necessary to see and manage outsourcing within a global context.

ISBN: 0230235506