@Risk

Offshoring has become a major strategic concern of top management, and more than half of companies responding to an ORN survey say they now have corporate-wide strategies in place for guiding offshoring and outsourcing decisions.

But, how will today’s slow global markets and increasing concerns about risk affect offshoring plans?

The new survey, conducted by the Global Offshoring Research Network (ORN) at the Fuqua School of Business, Duke University, offers some insights. ORN focused its research on the specific offshore projects of more than 1,600 companies from the U.S and EU.  The data was collected in 2007-2008 and is summarized in the organization’s fourth annual report, “Offshoring Reaches the C-Suite.”

Here are a few of the key findings:

• 53% of survey respondents said they now have a corporate strategy in place for guiding offshoring and outsourcing decisions at the business unit and function level –that’s up from 22% in 2005.

• Most offshoring projects initiated in 2007 were related to product and software development.

• Survey respondents identified two strategic drivers for offshoring projects: speed to market and domestic shortage of science and engineering talent.

• Survey respondents also identified two significant risks associated with offshoring: the loss of managerial control and employee turnover.

• Offshoring leaders are better able to direct their attention to risk management. They also train boundary spanners, establish  global corporate offshoring resource centers, and avoid “reinventing the wheel” for each new offshoring project.

• 60% of those companies that had already offshored, said they had aggressive plans to expand existing activities. However, keep in mind that at the time of the survey, few (if any) companies could have predicted the severity of the global financial crisis that was on the horizon.

There’s no doubt that offshore manufacturing has taken a blow from the recession. Consumer demand has plummeted, while wage and operating costs overseas have increased. What’s more, quality, performance, compliance, and other risk concerns have become significant factors in the overall offshoring equation, as well.

Consequently, I’m already looking forward to ORN’s next report, where I suspect nearshoring, reliance on smaller deals, and an enhanced commitment to social responsibility will emerge as major themes.

You can download a free executive summary of the ORN report at http://offshoring.fuqua.duke.edu/pdfs/Duke_ORN_4th_Annual_Report_Executive_Summary.pdf