Caution on offshoring decisions

by 03 Apr 2007

ORGANISATIONS SHOULD seriously consider the people management challenges and the potential pitfalls before they make the decision to offshore, according to the Chartered Institute of Personnel and Development (CIPD).

A recent UK survey found 15 per cent of organisations with experience of offshoring have brought back business activities which were previously transferred overseas. The most common reason was an unsatisfactory level of service or product quality, followed by difficulty with management control and rapid turnover of overseas staff.

“Organisations that decide to go down the offshoring road – focused purely on cutting costs without taking account of the potential difficulties and pitfalls –are likely to face considerable problems,” said Ben Willmott, CIPD employee relations advisor.

“Organisations must take into account the potential difficulties created by language problems as well as the risk of disruption to the supply of services or products.”

Commenting shortly after Lloyds TSB decided to close its call centre in Mumbai and bring the work back to the UK, Willmott said the introduction of offshoring is also liable to have a negative impact on staff morale and lead to UK job losses because all too often organisations (42 per cent) don’t involve HR when making strategic decisions about offshoring.

In all, just over one-fifth of organisations have offshored one or more business activity in the last five years or are currently considering doing so. Just under a third of the 600 respondents (30 per cent) reported that their organisation is under some pressure to offshore a business activity.


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