An Integrating Transformation Can Help U.S. Companies Increase Offshoring Savings

May 25, 2007
Back office function savings can increase by over 50%.

Fortune 500 companies could generate over $91 billion annually, or about $182 million on average per company, by strategically combining "Lift & Shift" efforts, which move back office processes overseas without first improving them, with "Transform & Shift" initiatives, where processes are optimized and then taken offshore. This is according to The Hackett Group, and Atlanta, Ga.-based advisory firm.

"As offshoring has matured as a business strategy over the past few years, the discussion has shifted, from 'Should We?' to 'How Should We?'" explained Michel Janssen, Hackett chief research officer. "But it's a complex long-term process, with the potential for spectacular successes as well as real failure that can cause companies significant setbacks. Companies that try to take the easy way out and rely solely on a simple 'Lift & Shift' approach, will significantly increase their risk, and are likely to capture only a fraction of the value that's out there."

Hackett's analysis calculates the following assessment of the potential cost reductions available to the Fortune 500, in total, through each of three approaches: "Lift & Shift," "Transform" and "Transform & Shift." The analysis is based on wage rate savings available in typical offshore geographies, and incorporates an assessment of the expected percentage of headcount that would be involved in each functional area.

Fortune 500 Savings (U.S. $Billion)

Lift & Shift

Transform

Transform & Shift

Finance

$16.1

$36.6

$42.2

Human Resources

7.8

9.8

15.5

Information Technology

29.3

1.4

22.0

Procurement

5.0

7.4

11.5

Total for Fortune 500 (U.S. $B)

$58.1

$55.2

$91.1

Total for a Typical Fortune 500 Company (U.S. $M)

$116.2

$110.4

$182.3

Interested in information related to this topic? Subscribe to our weekly Value-chain eNewsletter.

Popular Sponsored Recommendations

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

3 Best Practices to Create a Product-Centric Competitive Advantage with PRO.FILE PLM

Jan. 25, 2024
Gain insight on best practices and strategies you need to accelerate engineering change management and reduce time to market. Register now for your opportunity to accelerate your...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!