Professional services offshoring: Friend or foe?

I had lunch recently with one of my mentors, a retired Booz Allen & Hamilton partner. One of the things I like best about this man is his very direct encouragement of me, always delivered with respect and affection. In this case, his query occurred about five minutes after we'd greeted each other and exchanged news about each other's families. 

"So," he said, "how come you haven't written on your blog yet about the impact of offshoring on professional service firms?"  My immediate reaction was gratitude, for he clearly reads what I write, and also for the absolutely right-on nudge to deal with this strategically important issue.  My second reaction was "Hmmm, why have I not seen this topic being significantly discussed elsewhere?  (And it's not because I haven't been watching...)." 

First, some clarification about terms:  outsourcing (NOT what I will address here, but a topic I have addressed in previous blogs) is what a professional service firm does when it takes a piece of a non-core competency and hires outside for it.  Marketers know a good example of outsourcing is when the media relations function is implemented by an outside PR firm.  A common understanding of outsourcing also includes when a function is implemented from a remote location, such as IT services being delivered from India.  In this case, though, my friend referred to the hiring and retention of a firm's core functions to an off-shore professional. 

My friend fears that as more professional firms use this model, mostly to enhance their own profit margins, they will inevitably undermine the very core of their economic foundation, ultimately to their own detriment.  He intimated that the practice of offshoring was addictive, and that professional firms will find it impossible to go back to hiring their domestically based mainstay talent for the high prices they have paid heretofore. 

I have not heard any of my clients saying theyr're worried about offshoring.  Should they be worried?  If so, why aren't they?

I asked a few of my connections.  One friend suggested that offshoring was a big concern for professional service firm executives five years ago, but not now, because firms' initial thrall with offshoring proved not to be so workable after all, and they collectively decided not to get too far in. 

My mind is buzzing about this and other globalization trends in the professional services arena.  Is offshoring a model used a little, or a lot?  How was the decision to offshore made, and how was offshoring's impact evaluated? 

Where is your firm going with this model of implementing business?  What changes are being undertaken in order to embrace offshoring?  Does the practice of offshoring vary by industry? 

What is YOUR firm's experience with offshoring? 

Comments

[Ron Friedmann]

You and your readers who would like to learn more about outsourcing and offshoring in the legal market may find interesting my blog posts on legal outsourcing and offshoring at http://www.prismlegal.com/wordpress/index.php?cat=5.

Joy London and I also maintain a list of legal outsourcing at http://www.prismlegal.com/index.php?option=content&task=view&id=88&Itemid=70.

I don't draw as clear a distinction as your post suggests between core and non-core activities. In my presentation at http://www.prismlegal.com/index.php?option=content&task=view&id=124, I argue that one way to think about outsourcing and offshoring is just another step on the continuum of delegation that has long occurred in law offices, small and large.