Alternative Offshore Outsourcing Structures – February 2015

Offshore outsourcing retains an allure that the growth of hybrid cloud services and service integrator delivery models cannot entirely dispel. Even with the advent of varying alternative outsourcing models, organizations can still achieve significant savings from leveraging the benefits of doing business in a country with a lower cost of living and wage scale. But offshoring comes with strings attached, and neither of the two main approaches – full outsourcing to a local provider or wholly owned captive entity – is a universal solution to negating risk. Thus, organizations continue to seek smarter ways to include offshore services delivery as part of their sourcing strategies, all the while attempting to mitigate risks.

Risk mitigation comes in many forms, but it can start with the earliest, most basic decisions in a sourcing process: What to outsource? What is the optimal structure? Where is the best location? All of these issues must be factored in when making the sourcing decision. This Alert looks at some of the main alternative offshore outsourcing structures – from virtual captive, to joint venture, to “build-operate-transfer” models – and assesses how they compare in terms of benefits, flexibility, regulatory compliance and long-term operational suitability.

In recent years, organizations have tended to see offshore outsourcing as one of a menu of sourcing options, sitting alongside some degree of cloud-based or as-a-service delivery for certain services, or operating as part of an ecosystem of multiple providers managed in whole or in part under a service integrator and management (SIaM) regime. While one might have expected both cloud and SIaM methodologies to have eroded the use of offshore services, our experience is that the offshore market has adapted and evolved to fit within whatever structure is most prevalent, and we currently see an increasing trend to re-consider offshore models that, 5 years ago, seemed potentially to be moving into a backwater.
Read more at: Alternative Offshore Outsourcing Structures – February 2015 by Alistair Maughan and Christopher D. Ford

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