The Hidden Costs of Outsourcing: Beware and Be Wise
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Overview: Every day, more organizations are eagerly embracing the concept of offshore outsourcing to lower costs, increase efficiency and productivity, and enable employees to focus on the innovative, core endeavors that drive business forward. IT departments have been early adaptors of outsourcing projects and services. Now manufacturers, original equipment manufacturers (OEM), original design manufacturers (ODM), independent software vendors (ISV), system integrators (SI), and value-added resellers (VAR) whose products rely on embedded software and hardware across countless industries are exploring the benefits of offshore outsourcing to stretch their R&D dollars. After all, lower wages and higher productivity is a winning concept that should result in significant cost savings and improve a company's bottom line. Unfortunately, outsourcing projects don't always work that way. And at the end of a project, no CTO of a company wants to total up the costs and discover that the projected savings are not there. R&D productivity depends less on tool and process improvement and more on sufficient human capital. Today's R&D organizations, overwhelmed with projects and faced with shrinking time-to- market deadlines, are recognizing the business imperative to benefit from a global R&D strategy that includes offshore outsourcing. But as the heart of the enterprise, the R&D department cannot afford to make costly outsourcing mistakes. The consequences to the enterprise are too grave. Smart companies - aware that there may be hidden costs when outsourcing - recognize potential obstacles and take steps to circumvent them.