IT the 'enabler' of global outsourcing.

• Author: Aird, Charles L.
• Position: Technology

Since the early 1990s, United States companies have looked offshore to contain their labor costs, secure new sources of talent and more quickly bring their products to market.

Today's economic climate likely will prompt more companies to seek out and improve their global outsourcing strategies. Many business leaders and experts wonder if technological improvements--which have enhanced productivity, efficiency and operations--will allow U.S. companies to reverse the global outsourcing trend. According to available evidence, this is highly unlikely.

Without information technology, a U.S. business could not possibly route customer calls to India, assign engineering work to China or delegate payroll or accounting work to Latin America or Eastern Europe.

But technology is not the force that led companies offshore; and it will not keep them onshore. Technology should be considered an enabler--not a driver--of today's modern, extended, global enterprises.

Economic and social conditions such as labor arbitrage, tax incentives, access to global talent and a desire to contain overhead costs are the true drivers of global outsourcing. As such, there is no reason to expect that technological advances will entice U.S. companies to keep operations onshore. In fact, it's highly likely, just the opposite will happen.

As technology reduces the barriers and costs for companies to operate offshore, even more firms will explore the benefits of a global outsourcing strategy.

For many companies, technology is no longer a major impediment in global outsourcing decisions; the technology needed to offshore business functions already exists. The primary considerations are how much firms are willing to invest, and what degree of risk they are willing to take.

'Catch-22'

Because of the economic crisis, however, many organizations are currently faced with a "Catch-22."

They recognize that, more than ever, they need global outsourcing to remain competitive and contain costs. In fact, for many firms global outsourcing could mean the difference between survival and collapse.

At the same time, some companies are hesitant to make any investment--including the up-front costs and infrastructure needed--to implement a global sourcing strategy, such as consulting fees, information technology systems and staff severance and retention costs.

The technology that enables off-shoring has changed dramatically since the early 1990s, when large companies first began experimenting with...