Benefits and Challenges of Offshoring
While there are benefits and risks in incorporating offshore suppliers in a sourcing strategy,
in most cases, companies find that the advantages outweigh the risks.
Benefits
The primary business rationale for...
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Benefits and Challenges of Offshoring
While there are benefits and risks in incorporating offshore suppliers in a sourcing strategy,
in most cases, companies find that the advantages outweigh the risks.
Benefits
The primary business rationale for offshoring has been to reduce IT operating and
infrastructure costs.
The cost savings from offshore outsourcing increase with the
percentage of total development effort outsourced and the percentage of work performed
offshore.
They are maximized when the entire development is outsourced and all the work is
performed overseas.
Since the predominant component of IT costs is direct and indirect labor, sizable cost
reductions can be achieved by moving these functions to lower wage rate locations.
Based
on recent average wage rates for IT professionals, net savings from offshore outsourcing
generally range between 25 to 40 percent for U.
S.
and European companies.
Cost savings
has been the primary business rationale for
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