Duke University and Archstone Consulting

Offshoring Study:

Background Information and Highlights

 

 

About the Study:

  • Archstone Consulting and the Center for International Business Education and Research (CIBER) at Duke University's Fuqua School of Business are conducting joint research on the subject of offshoring white-collar jobs.
  • The focus of the research is to objectively benchmark key financial metrics and current perceptions of financial, operational and political risk associated with offshore operational models. 
  • This is the first release of the findings.  The benchmarks will be tracked over time and be regularly published in leading business and academic periodicals.   Subsequent releases will include additional participants, and service providers as well as companies in Europe.
  • The research is conducted through on-line surveys to business leaders of world-class corporations who fall into one of the following three categories:

-          Currently offshoring

-          Currently considering offshoring

-          Currently not offshoring

-          Third Party service providers operating offshore operations

  • Participants also include offshoring service providers with experience in establishing and operating offshore operations.  These results will be released at a later date.

·        Preliminary results of the study will be shared at the 2004 National Forum on Trade Policy conference held from December 8th-10th, at the Millennium Hotel, Durham, NC. 

·        The forum is hosted by Duke CIBER, the University of North Carolina Chapel Hill and the North Carolina Department of Commerce.

·        Speakers and attendees include state and national trade officials, policymakers, industry
representatives and leading experts, who will look at the impacts of Federal trade policies on their local economies and budgets.

 

Why Duke and Archstone Consulting?

·        Archstone Consulting’s senior practioners have experience with almost all aspects of offshoring including: strategy development, service delivery, model architecture, site selection, design, build and migration. 

·        Duke CIBER’s charter is to conduct research on American competitiveness and International Business.

·        Together Archstone Consulting and Duke CIBER represents a uniquely balanced research team that combines rigorous academic research methodologies with the practical insights of an experienced practitioner.

 

About Duke/CIBER:

·        The Duke University Center for International Business Education and Research (CIBER) was established in 1992 by the Fuqua School of Business and has been directed by Professor Arie Y. Lewin since 1995.

·        There are 30 CIBERs located throughout the United States and funded by the U.S. Department of Education under Title VI through a competitive bid process.

·        Duke CIBER collaborates with other CIBERs to carry out projects and engages in outreach activities with other centers and departments at Duke University, as well as other colleges and universities, businesses, and communities to enhance the international development the Fuqua School of Business.

·        Duke CIBER's main goal has been to internationalize the Fuqua School of Business by incorporating international content into core courses, developing specialized international electives and innovative teaching materials, enrolling students in foreign language courses, and promoting international business research and American competitiveness.

 

About Archstone Consulting:

·        Archstone Consulting is an independent strategy and operations management consultancy.

·        Archstone Consulting was founded in 2003 by consulting industry veterans from top tier firms.

·        The firm currently has 200 employees in 4 offices:  Chicago, New York, San Francisco, and is headquartered in Stamford, CT.

·        Archstone Consulting has an impressive client roster of Fortune 500 companies.

·        The firm specializes in the consumer packaged goods and retail, life sciences, manufacturing, and services sectors. What sets Archstone Consulting apart is its ability to work in concert with clients, offering unbiased advice, efficient execution and definable results.

·        The firm designs and implements organizational change geared to capture value and stimulate growth through financial solutions, strategic initiatives, and operational improvement services. 

·        Archstone Consulting has appeared in: Fortune, Forum Magazine, Business Finance Magazine, Pharmaceutical Executive, Chain Store Age.com, ChemWeek, Progressive Grocer, Women’s Wear Daily, Crain’s, and named one of the seven small jewels by Consulting Magazine. 

 

Personal Interest:

·        Todd Lavieri, CEO and President of Archstone Consulting, is a Fuqua alumnus. Gary Sutton, Director for the research project is a Fuqua alumnus.  The firm also has other Fuqua alumni.

 

Project Contacts:

 

 

 

 

 

Duke CIBER, Archstone Consulting Offshoring Study

Demographics and Highlights

 

To date there have been over 90 company participants in the study; all from the client side: third party service providers surveying began on November 12th and is ongoing. The study will also be expanded to include European companies early in 2005. Some demographics and highlights of findings follow:

 

Key Demographics

  • Average annual revenue of the firms represented in the study is $21 billion, with an average market valuation of $31 billion
  • Primary industries represented include: Financial Services, Automotive, Airline, Consumer Products, Pharmaceutical, Energy, Retail, Hospitality, and High-Tech
  • 70 % of the participants have offshoring operations representing over 160 distinct functional implementations.
  • 71 % of the offshoring respondents have 18 months or more operations experience.

 

Key Preliminary Findings

  • 56% of the participants with offshore operations expected savings greater than 30%, with 28% expecting savings greater than 40%.
    • 60% of participants reported actual savings greater than 30%
    • 40% of participants reported actual savings greater than 40%
    • 72% of implementations met or exceeded their cost savings expectations

 

  • 75% of implementations that have achieved their service levels targets did so within 12 months.  It does not appear that the captive model differs from the outsourced model in achieving service level targets.

 

  • The majority of respondents (93%) agrees or strongly agrees that “taking out costs” is a critical driver of offshoring. (69% also agree that competitive pressure is a critical driver)
    • 56% list  increased service levels,
    • Surprisingly 55% list access to qualified personnel, and only 35%, business process reengineering

 

  • Service levels and cultural fit are the two highest reported risks (61% and 54% respectively). Only 26% rate disaster recovery a significant risk.

 

  • The political backlash against offshoring apparently is just that:  political
    • 4% of respondents postponed their efforts due to political backlash
    • 24% moved forward but quietly
    • 72% reported that political backlash had no influence whatsoever
    • Only 35% rate political backlash a significant risk.

 

  • For functions offshored IT, Finance & Accounting, and Contact Centers lead the way with 66%, 60% and 54% respectively. In contrast only 24% of respondents have an HR function offshored.

 

  • Offshoring respondents are more willing to outsource their customers and employees contact centers to third parties than their financial transactions or general ledger functions. While 90% of offshore contact centers are outsourced, 70% of finance and accounting operations are captive. 

 

  • Companies are planning to expand the scope of their offshoring implementations. Starting with IT and finance, call centers are usually the third function to be offshored. More complex processes and functions follow such as engineering services and research.
    • The majority (55%) of participants report that they will offshore more business functions in the next 18-36 months.
    • Companies’ future expansion plans indicate an 81% increase in the offshoring of Research, 75% increase for human resources and 55% for engineering services.

 

  • India continues to lead the way with 69% of offshore operations located in India.  Not surprisingly, 87% of IT operations reported being located in India.  65% of new operations expected in the next year will be located in India contrasted with 26% in the rest of Asia.

 

  • While we recognize that offshoring should be long term in nature, everything must come to an end sometime.  51% of offshoring operations have an exit strategy, while 27% do not and 22% do not know.