Is U.S. Bidding Farewell to Outsourcing? Why?
Recently General Motors created a stir in the marketplace, as it proposed to bring back a major chunk of its business IT operations back in-house to delivery centers based in U.S. Apparently, GM is not the sole organization which is devising plans to insource its previously outsourced IT operations. The big question is- why are U.S. based firms considering in-house solutions so seriously? Is it time that U.S. bids farewell to the outsourcing phenomenon?
IT outsourcing services might prove to be a beneficial approach for some firms, especially the ones looking for a business model that can curtail costs, provides clear definition of service levels and scopes and renders the company with time and resources to focus on core business competencies. However, some companies are towing away their outsourced services. There are numerous reasons duty-bound for this. Let's take a look at some of them.
1. Expectation Fiasco: This is the most commonly stated reason behind the failure of major mobile development outsourcing engagements. Deals have failed to meet either of the two expectations- service delivery or financials. At times, organizations discover that they are being billed for amount more than quoted due to additional hidden charges. On the other hand, sometimes customers push the offshore service providers off the edge when they don't get the expected response.
2. Appetite for In-house Expertise: Some firms come up with expectations to set up a better in-house infrastructure with broader service capabilities, wondering that these capabilities will render an edge to their business by enhanced revenue generation, elevating speed of go to market product cycles, safeguarding company's intellectual property and rendering greater innovation. Another factor influencing companies to insource their IT services is political pressure pertaining to public relation services. This prevents organizations to opt the outsourcing way for their IT arrangements.
3. Marketplace Pressure: The dynamics of the outsourcing marketplace are fast changing which is making it difficult for the outsources to maintain a steady hold and prove their value propositions. The sudden upsurge in employ wages has forced outsourcings service providers to revise their staffing mix and chose alternate delivery locations, in order to match up the changing cost dynamics and stay financially competent. These changes, especially in the resource pool, have resulted in deteriorated quality. Moreover, several firms are facing the challenge of €job hopping' within the refrains of their talent pool, which leads to reduced stability of the deliverable. When considered as a whole, these factors can lead to customers insourcing their IT services and cancellation or termination of existing outsourcing agreements.
Numerous factors are prompting organizations to revisit and analyze the equation of outsource/in-source business models. The aforementioned factors may have posed a strong case in favor of in-house solutions but IT outsourcing services are not going away completely. Organizations that are outsourcing their development projects to offshore locations need to make potential preparations before they begin to insource their requisites. The key factors to consider include flexible contracts, financial segmentation, high skill retention within the organization and modular and visible delivery models.
IT outsourcing services might prove to be a beneficial approach for some firms, especially the ones looking for a business model that can curtail costs, provides clear definition of service levels and scopes and renders the company with time and resources to focus on core business competencies. However, some companies are towing away their outsourced services. There are numerous reasons duty-bound for this. Let's take a look at some of them.
1. Expectation Fiasco: This is the most commonly stated reason behind the failure of major mobile development outsourcing engagements. Deals have failed to meet either of the two expectations- service delivery or financials. At times, organizations discover that they are being billed for amount more than quoted due to additional hidden charges. On the other hand, sometimes customers push the offshore service providers off the edge when they don't get the expected response.
2. Appetite for In-house Expertise: Some firms come up with expectations to set up a better in-house infrastructure with broader service capabilities, wondering that these capabilities will render an edge to their business by enhanced revenue generation, elevating speed of go to market product cycles, safeguarding company's intellectual property and rendering greater innovation. Another factor influencing companies to insource their IT services is political pressure pertaining to public relation services. This prevents organizations to opt the outsourcing way for their IT arrangements.
3. Marketplace Pressure: The dynamics of the outsourcing marketplace are fast changing which is making it difficult for the outsources to maintain a steady hold and prove their value propositions. The sudden upsurge in employ wages has forced outsourcings service providers to revise their staffing mix and chose alternate delivery locations, in order to match up the changing cost dynamics and stay financially competent. These changes, especially in the resource pool, have resulted in deteriorated quality. Moreover, several firms are facing the challenge of €job hopping' within the refrains of their talent pool, which leads to reduced stability of the deliverable. When considered as a whole, these factors can lead to customers insourcing their IT services and cancellation or termination of existing outsourcing agreements.
Numerous factors are prompting organizations to revisit and analyze the equation of outsource/in-source business models. The aforementioned factors may have posed a strong case in favor of in-house solutions but IT outsourcing services are not going away completely. Organizations that are outsourcing their development projects to offshore locations need to make potential preparations before they begin to insource their requisites. The key factors to consider include flexible contracts, financial segmentation, high skill retention within the organization and modular and visible delivery models.
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