The Business Case for Onshoring Technology Support Services

The question of onshoring or offshoring technology support services is an increasingly tough decision faced by many of today’s CIOs. While many companies prefer native support from a cultural perspective, offshoring IT services has been a trend in recent years due to budget constraints and pressure to reduce the overall cost of IT support. But many companies that decide to go offshore, typically for financial reasons, are faced with a difficult transition that often times won’t outweigh the saved costs incurred from offshoring.

Cultural and language barriers that come with offshoring IT support can result in frustrated users who don’t get what they need. Many outsourcers promise to work with language coaches for overseas workers to neutralize an accent, but when users call for support, the experience may vary. Language barriers can result in longer problem resolution timelines and unhappy users, and sometimes can lead to a company rethinking their offshore strategy when faced with internal pressures from end users to move back onshore.

The Decision to Onshore: What to Consider

Deciding whether to onshore or offshore depends on what a company is hoping to achieve. Performance and risk are especially important to consider. If a business is looking for a lower cost model and cultural and language barriers do not inhibit performance, offshoring IT support makes sense. Of course, this depends on the type of support services needed. For instance, non-voice support services for lower level support including password resets is well suited to an offshore model. However, highly technical troubleshooting issues that are off-script are made all the more difficult for end users to comprehend when a language or cultural barrier is added, and thus may be better handled onshore.

Each company must also consider where it is as a business and what the culture is like internally. If there is a company emphasis on cultural continuity, oversight, security and stability, then onshoring is likely the best fit.

A company’s industry should also be considered. For instance, financial companies have many more regulations around data, making compliance in the U.S. much simpler to achieve than overseas. Financial institutions also have customers who are concerned with transaction speeds and security and thus more receptive to native support. With larger budgets and an ability to focus more on performance and quality rather than costs, not to mention HIPAA constraints, some health care providers and life sciences companies also have a more favorable environment for onshoring. 

The Pros of Onshoring

• Proximity. One of the greatest benefits of onshoring is proximity. When clients decide to move operations overseas but aren’t committed to quarterly or at least annual travel to that location to check on operations, it can pose a problem. If IT operations are based in the U.S., it makes it much easier for companies to monitor and review operations by avoiding extended travel times when visiting managing service centers, thereby ensuring that business is running smoothly.
• Shrinking Gaps in Labor Costs. Traditionally, offshoring support services was seen as a foolproof way to cut costs and save money. But the diminishing labor costs between onshoring and offshoring no longer make this such a clear-cut decision. While there’s no doubt that going offshore does generate labor savings, there are other costs to be considered such as transition, oversight, and travel, which make onshore costs increasingly competitive. Businesses need to look at the entire picture when considering cost savings.
• State Tax Incentives. Such stimulants often make keeping IT operations in the U.S. an even more attractive option for many companies.
• Increased Customer Satisfaction Rates. When U.S. customers call someone overseas for IT technical support, the problem resolution timeline can be long due to differences in native language and even cultural experience. Thus, higher customer satisfaction generally occurs when support is offered onshore.
• Greater Visibility. When support services are offshore, companies have a more difficult time maintaining control and visibility over finance operations and processes. There can also arise more difficulties of communication barriers when explaining business goals, strategies and processes.

Deciding where to locate your support services team should not be taken lightly. The biggest reason that companies go with an offshore model typically involves financial reasons, but it can often prove to be a tough transition. An offshore model incurs the costs of transitioning operations overseas, oversight, travel, and dealing with user perception—when adding up all the soft costs, there are often costs that you can’t quantify. At the end of the day, businesses should closely evaluate what they are really saving with an onshore versus offshore model. Whatever decision is made, businesses should keep in mind that costs are high should they later decide to transition to a different model.

About the Author

Jim Larkin joined Randstad Technologies in June 2015 and is currently serving as Director of Pursuit Strategy and Innovation for Technology Support Services. He has more than 20 years of experience, most recently as Global Director of Service Management at Unisys (News - Alert) Corporation. Prior to joining Randstad Technologies, Jim supported over 100 global accounts with over 500 delivery staff around the world, holding responsibility for P&L of more than $250 million in North America.