Measurement and Enhancement of ROI on offshore outsourcing to India

Basics

Developing a Business Case for Offshore Outsourcing requires calculation of visible and intangible costs, and the expected benefits. OMNISPAN is a leader in developing a framework for estimation of both cost reduction and revenue enhancement in offshore outsourcing to India, taking into account project governance and other overheads.

Estimation of ROI

Our framework estimates cost reduction by performing an apples to apples comparison of labour, management and overhead costs between the integrated in-house offshore operation and an equivalent complete in-house operation. The estimates vary based on the stage (Crawl, Walk or Run see Methodology>>), as well as in the nature of operations (outsourcing of product development vs. business processes) and the model of offshore operations (fixed price vs ODC vs B-O-T vs own subsidiary). For a Pilot, the ROI is low. A cost reduction of 30%-40% is expected as the partnership between the client and an offshore provider, matures for a product development operation, in the Walk Stage. The cost reduction could be estimated in excess of 60%+ for a well run support operation or a BPO operation. We discuss these estimates with our client, and use these as benchmarks for monitoring the performance of the offshore outsourcing operations to India.

The major benefits in offshore outsourcing to India are not in cost reductions but in the long term value it brings to your business. We estimate this value by the revenue potential of the redeployment of in-house resources to more strategic functions. An example of these strategic functions could be building new lines of products/services. We also estimate additional revenue from the integrated in-house offshore capability such as more deliveries of existing products/services to the market and improved SLAs for support operations (due to a 7*24 hour virtual operation). These could potentially translate into major benefits in the Walk Phase (see Methodology>>) of the operations.

The value of a strong offshore relationship with an Indian provider will be continuously reflected in both the top line and bottom line of your business.