5 Myths of Managed IT Services Debunked - Myth #3: Offshore is Always Less Expensive

The next of our five-part series explores the factors that drive the total cost of delivering Managed IT Services offshore versus a domestic delivery model.

To dispel the myth of Domestic Cannot Be Global, the key is to perfect a new Managed IT Services delivery model based completely in the United States that leverages the best quality tools, labor, multi-lingual and facilities requirements of global service. Let’s move ahead to another, related misconception about how to assess, engage and leverage Managed Service Providers to suit your needs.


Throughout the 1990’s, the advent of Y2K legacy systems remediation fueled a move offshore of many generalized IT Services. The offshore models of that time purported to give access to large, cost effective labor pools; thus the popularization of the term, labor arbitrage. Global labor arbitrage occurs when jobs move to nations where labor and the cost of doing business is considered to be inexpensive by the buyer of that service.

However, with the advent of the user experience being a key factor in the quality of managed services, buying into the “offshore is always less expensive” mentality -going offshore for cost reasons alone- is not only a flawed premise, it can actually be dangerous, especially when it comes to managed services that are highly interactive with end users. This is due to a number of factors, including the international inflation rates, high employee turnover in certain markets, cost and availability of secure connections to global facilities; not to mention geo-political risk factors.

Evolving Business Environment

Over the last 10 years, lessons learned in the Managed IT Services arena reveal:

  • The end-user experience often dictates the attributes of high quality service;
  • Quality, consistency and cultural alignment are often as important as pure cost metrics;
  • These combined cost metrics are influenced by the ability of service providers to leverage automation, business intelligence and operational efficiencies.
  • CIO performance is more likely measured based on the user experience, end-user satisfaction and loyalty to service.

Ask yourself these questions: Are you factoring in expenses beyond the cost of labor? For example, the cost of connectivity or international turnover? Have you considered the geo-political risks? What you need to analyze is the total cost of ownership and compare that to the quality of service, in tandem with the user experience goals you want to obtain. When you take all of this into account, especially for a service such as enterprise service desk support that is highly interactive with business end users, going offshore simply to offset cost is not always less expensive. In fact, going offshore could cost you plenty in terms of turnover, intellectual property loss, time-zone difference, cultural inconsistencies and efficiency levels.

Today, this evolving business environment has created an opportunity whereby the heartland labor arbitrage; U.S. domestic service delivery model can be your most powerful choice for a select group of Managed IT Services.

Top Class User Experience

For many of today’s sophisticated managed services buyers looking for a top class user experience in user rapport, crisp interactions and technical efficacy, some offshore models have downright failed, whether it stems from lack of empowerment or cultural misconceptions. In addition, many of today’s global players of Managed IT Services are seeing a return to sourcing managed services domestically, or onshore. As a result, more and more are investing in the United States as a delivery hub, building up U.S. delivery capability.

If you want a high quality, cost effective service, the answer doesn't always lead to an offshore delivery model. The answer could easily point to a rurally-sourced U.S. domestic service with the right level of quality, at the right cost point to achieve a better outcome. If you look at the whole cost/quality equation and apply it to a certain class of managed services that are either highly customized or highly interactive with end users, the United States is a very viable choice for service delivery in today's marketplace.

Next time, we’ll explore Myth #4: Tier 1 Support is a Commodity.


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