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

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


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