Offshoring Is Not Always Right Move

Ann All

Despite the positive growth outlook for offshoring, it is not always the best alternative for every company or for every business activity.


Case in point: Teradata, which found out the hard way that offshoring its software development wasn't a good idea. The move led to a decline in quality and a two-year delay in the next iteration of its CRM product.


The company is now replacing staff it had earlier laid off in North America and intends to keep activities related to "new development, new ideas, core intellectual property" closer to home, says its VP of research and development for customer management solutions. It still employs folks in India and China for product support.


A key problem, says the VP, was the "tremendous amount of people" required to manage the offshore vendor.


Despite companies' growing experience with offshoring, many of them still underestimate the amount of management oversight required, according to a consultant interviewed in this CIO Insight article.


Companies shouldn't necessarily rush to bring business activities back in-house, as it is usually an expensive task, cautions the consultant. First develop a methodology to measure cost vs. risk, and follow up with a clear migration strategy for the activities you want to insource.


Further good advice is offered by Michael Conley of Forsythe Technology in an interview with IT Business Edge. Companies must honestly evaluate the abilities of their staff before bringing apps back in-house, and preferably should migrate only one application at a time, he says. Begin with systems involving the most sensitive information.

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