Gartner Says Companies Examining Offshore Outsourcing Options Should Also Consider Offshore Insourcing as a Solution for Their Sourcing Needs.

Business Editors

STAMFORD, Conn.--(BUSINESS WIRE)--Aug. 28, 2003

Gartner Analysts Say There is No Set Model for Success in Offshore

BPO; Enterprises Will Most Likely Use a Combination of Offshore

Solutions for Their Specific Goals

With the increased interest in offshore business process outsourcing (BPO), enterprises should also examine the benefits from offshore insourcing to determine the right mix of offshore delivery options for them, according to Gartner Inc. (NYSE: IT and ITB).

Offshore insourcing for business processes is when companies set up their own offshore processing centers. A large number of companies prefer to maintain or retain control by "insourcing" their back office functions and business processes by setting up their own captive "shared service centers." Enterprises wary of control and data security issues can benefit from the offshore advantage of "insourcing" offshore.

"The rewards and risks of offshore BPO are just beginning to be understood. As enterprises and service providers evolve, it has become clear that there is no right model for a given company. Instead, enterprises will use parts of a model or a combination of models as they begin to explore and iron out the issues around sending business processes offshore," said Sujay Chohan, research vice president for Gartner. "No enterprise will fully insource or outsource offshore. Most will use a combination of delivery models as they climb the learning curve to BPO."

Gartner analysts said enterprises considering offshore outsourcing for business processes, should carefully examine and evaluate their options. Many of the decision criteria regarding insourcing vs. outsourcing in the domestic market also apply to offshore sourcing.

Gartner analysts recommend that enterprises ask themselves the following questions before embarking on an offshore sourcing strategy for business processes:

-- Why consider outsourcing the function? Is it to focus on our

core business, to improve service levels, to benefit from

industry best practices or to reduce transaction costs? At the

present time, cost is the key driver for offshore BPO,

although cost reductions can be achieved via a captive center

if the enterprise has a large quantity of transactions.

Additional cost reductions can be derived only from a

scalable, multiclient operation.

-- What processes are being evaluated for outsourcing? Some

organizations have begun to achieve end-to-end BPO, achieving

results through process transformation and automation.

Repetitive, transaction-intensive processes are the best

choices for offshore outsourcing. Many enterprises considering

sourcing end-to-end business processing do not want to give up

control of the process because of strategic and security

concerns. In this situation, offshore insourcing or

captive-shared service centers are viable options.

-- How well is the function being performed today? The answer to

this question depends on the availability of process

measurements inside the enterprise. If you find, at the end of

the measurement study, that you have achieved

better-than-industry benchmarks, offshore insourcing is a good

option. If the process performance is less than average,

outsourcing might be a better option.

Additional information is available in the report "Offshore Insourcing vs. Offshore Outsourcing." This report examines the benefits of offshore insourcing for enterprises that are wary of offshore outsourcing. This report can be purchased on Gartner's Web site at www.gartner.com/DisplayDocument?id=405460&ref=g_search.

More information on the industry is available in Gartner's IT Sourcing and Procurement Directors Membership Program. Gartner has launched a program that brings together expertise from across Gartner focusing on outsourcing, sourcing and procurement in a convenient, integrated package tailored specifically to the business and technology issues facing sourcing and procurement executives -- whether focused on strategy, evaluation and selection, contract negotiation, or management.

The Gartner IT Sourcing and Procurement Directors Membership Program will help executives increase the visibility, reputation and success of IT sourcing or procurement initiatives. It will also enable executives to respond more efficiently and effectively to the multitude of demands typical in the current time, budget- and resource-constrained environment. For more information, visit www.gartner.com/mp/ITSP, or call Gartner at 203-316-1277.

To keep up to date on the latest outsourcing issues, please visit Gartner's Outsourcing Web site at www.gartner.com/outsourcing. This Web site offers content, tools, products and services that are needed to make effective, strategic decisions about outsourcing. When browsing the site, users receive a breakdown of key outsourcing issues, industry trends, and best practices for making smarter business decisions. This area also includes relevant research and links to Consulting and Measurement services. Custom Alerts are also available, enabling users to stay current on new research focused on their outsourcing agendas. Free copies of the Gartner outsourcing handbook, Outsourcing: The Real Deal, can also be ordered on the Outsourcing Web site.

About Gartner

Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients leverage technology to achieve business success. Gartner's businesses are Research, Consulting, Measurement, Events and Executive Programs. Founded in 1979, Gartner is headquartered in Stamford, Conn., and has more than 3,800 associates, including approximately 1,000 research analysts and consultants, in more than 75 locations worldwide. Revenue for calendar year 2002 totaled $888 million. For more information, visit www.gartner.com.