Accenture Bets On Offshore Outsourcing Business

Companies that outsource IT projects to service providers using offshore operations must weigh the benefits of cost savings against having less control over project management. But with few signs of an economic recovery happening soon, Accenture Ltd. is betting that cost savings will tip the scales in favor of the offshore model.

Accenture last week said it's opening offshore facilities in India and the Czech Republic. The moves stem from growing demand for outsourced business and IT services, says James Hall, Accenture's managing partner of technology business solutions. Customers are outsourcing everything from entire departments such as human resources to the management of IT systems and application-development projects.

Accenture's outsourcing business was $1.98 billion in fiscal 2001, or 17% of the its net revenue. Depending on the work being performed and the client's location in the United States, shipping a project offshore can cut costs by as much as 40%, Hall says.

But experts caution that not all projects are well-suited to the offshore model. "I wouldn't consider outsourcing projects that include sensitive client data or your own intellectual property to offshore facilities," says Jeff Wenger, VP and chief technology officer of Tax Technologies Inc., a Haworth, N.J., provider of tax-compliance software.

Wenger, who earlier in his career managed offshore outsourcing projects for a Big Five consulting firm, says countries such as India aren't as diligent as the United States in protecting intellectual property. Without such protections, offshore developers can keep a client's code and use it to develop new applications of their own, he says.

IT executives should also consider deadlines before picking an offshore outsourcer. Shorter projects with rigid deadlines are less likely to be successful. "If my job depends on delivering something within the next 12 months," Wenger says, "I wouldn't ship it offshore."