Counting the Savings

This report by the Boston Consulting Group suggests that offshoring hitherto considered a cost saving tool for transaction intensive business processes, is fast evolving into a powerful organizational lever for business transformation:

Although 65% of India’s 180,000 outsourcing services work force is involved in transaction-intensive services like call-center support or check processing, the industry as a whole helps its clients save $1.5 billion annually, according to a recent research paper, “Offshoring: Beyond Labor Cost Reduction,” by the Boston Consulting Group (BCG). (India’s outsourcing services industries employed about 415,000 people as of March 2006, according to India’s National Association of Software and Services Companies). GE alone saves more than $350 million annually after offshoring about 900 different processes to India, according to the paper, which was written by analysts in BCG’s New Delhi offices.

It would be interesting to look at whether these savings translate into more transformative measures of performance such as innovation, customer satisfaction, market share or profitability.