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Trend #1: Offshore Business Models Are Growing

As offshore outsourcing becomes more prevalent, large corporations explore which offshore business model makes sense for their organization. When thinking about which business model to adopt, companies have to answer two questions:

  1. Who will own the offshore project: subsidiary, joint venture, or external vendor?

  2. Where will the work be done: onsite, offsite onshore, or offshore?

The different ways companies can answer these two simple questions have led to the creation of several offshore business models. The first generation of these models focused on utilizing third-party vendors. Second-generation models are more sophisticated than those of the first generation, and span multiple models, as shown in the following table.

Model

Practitioners

Global delivery or blended outsourcing models

Large global vendors

Global shared services center

Large multinationals

Onshore/Offshore hybrid delivery model

Midsize and large offshore vendors

Build-operate-transfer (BOT) model

Risk-averse corporations

Offshore multisourcing model

Experienced multinationals


Of these models, the global delivery model (e.g., Accenture, IBM) and global shared services centers (e.g., GE, Citigroup) are becoming quite prevalent. Companies that adopt them cite benefits such as continuous, near 24-hour work cycles; the ability to structure and assemble teams with diverse, multiple skill sets; and the ability to quickly scale (up or down) depending on the project requirements. On the other hand, they have to overcome challenges such as project management and administration costs, optimization of cross-cultural communication, and the supervision of onsite teams.

What does this mean for you? Corporations such as Bank of America, Citigroup, American Express, and General Electric are leading the way in creating new business models around global shared services centers. These centers are essentially in-house offshore captive units that replicate the capabilities of offshore vendors for an even lower cost. If you work for any of these firms, the chances are high that you'll be affected in 2004 if you haven't been already. More than just IT, we expect areas such as finance and accounting to be affected significantly in 2004.

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