A LACK of planning and consideration of hidden costs are among the most common pitfalls that lead to Australian companies failing to capture business benefits from offshoring deals, according to Gartner
A LACK of planning and consideration of hidden costs are among the most common pitfalls that lead to Australian companies failing to capture business benefits from offshoring deals, according to Gartner.
The negative perceptions surrounding offshoring in the Australian market are incorrect, according to Gartner, adding that the process works and has real benefits, providing certain pitfalls are avoided.
“The benefits that can be gained from global sourcing are real and understanding the competitive impact of pursuing or not pursuing global sourcing is critical,”said Gartner research vice president Helen Huntley.
Speaking at the Gartner Outsourcing and IT Services Summit in Sydney, she also noted that the potential advantages of global sourcing would not materialise overnight or without work.
Australian companies are planning to increase their sourcing of services from offshore over the next two years, according to Gartner. Huntley said that offshore service delivery is here to stay and Australian companies must capitalise on experiences already learned.
However, offshoring decisions should not be taken lightly. “The most common mistake for companies is to look only at the opportunities for cost savings and the heightened activity in the market, and rush into adopting global sourcing practices without truly assessing other considerations,” Huntley said.
Huntley identified the root causes and key learnings for unsuccessful offshore deals. “Hidden costs are rarely considered when a decision to go offshore is made by enterprise managers eager to save money and enhance productivity. Unfortunately, after the deal is signed, these hidden costs quickly become apparent, eroding the immediate cost savings envisioned.”
Gartner emphasised that planning for sourcing of any kind has to start with a comprehensive sourcing strategy.
“A sourcing strategy must encompass all aspects of the business’s processes, lay down maxims for what sources of services are appropriate for which parts of the business, what business values will be applied to justification, and what governance will be used to ensure success,” according to Huntley.
Gartner recommended that companies should contemplate all aspects of an offshore deal in order to reap the rewards.
“Additional infrastructure costs, governance models, risk management/mitigation and cultural training must all be considered thoroughly,” said Huntley.
“Doing business with an offshore vendor is different from onshore models, and each deal must be looked at individually as each vendor and geographic areas contain different sets of risks to mitigate and different issues to address.”
