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Offshoring by US Companies Doubles

Small and medium employers find talent overseas.

In 2008, more than 50% of U.S. companies had a corporate offshoring strategy, more than doubling from the 22% in 2005, according to the Duke Offshoring Research Network's fifth annual report produced in collaboration with The Conference Board. Moreover, 60% of the companies currently offshoring have aggressive plans to expand existing activities.

The globalization of innovation is continuing at an increased rate, the report found, driven by the need for speed to market and a shortage of science and engineering talent.

Companies with a corporate offshoring strategy often report cost savings, meeting target service levels, improved relations with providers and better performance in overcoming internal resistance, according to Ton Heijmen, a senior advisor at The Conference Board.

The report noted that:

  • Of all the offshoring/outsourcing projects initiated in 2007, most were related to product and software development.
  • The loss of managerial control and employee turnover were cited as the most important risks associated with the globalization of innovation through offshoring.
  • Small and midsized companies are increasingly sourcing innovation offshore, in part because they find it difficult to compete for top domestic talent.
  • Small companies are adept at identifying and accessing new geographical talent clusters, such as Brazil, Egypt, Sri Lanka and Russia.

The report found that companies with successful offshoring practices: have a senior-level champion for offshoring efforts; use a service provider selection model; conduct on-site visits to providers; use a master service agreement; have internal stakeholder buy-in for offshoring; and establish a global corporate offshoring resource center.

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