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Companies have long embraced a range of IT application-development offshoring programs while keeping work on the IT infrastructure—data center and network management, end-user desktop services, security, and other core IT functions—firmly planted onshore. Then, over the past few years, increasing confidence in remote management, as well as the spread of low-cost bandwidth and the wider availability of high-speed networks, spurred the expansion of offshoring in India (and other parts of Asia) and in Europe. Buoyed by these advances, the offshoring of IT infrastructure work has grown at a compound annual rate of 80 percent since 2005. There have been some notable successes. One global financial-services institution achieved labor cost savings of more than 20 percent just halfway through a 36-month program. Organizations in industries such as pharmaceuticals and investment banking have moved 40 percent of their infrastructure labor to low-cost locations, reducing overall infrastructure costs by about 10 percent.

Yet as the shift intensified, problems associated with the transition to offshoring began to appear. Our most recent experiences1 helped us identify the common problems and ascertain the steps companies can take to deal with them and to raise the overall value of offshoring programs. The more difficult issues include a tendency to ignore the specific needs of offshoring infrastructure work, inadequate rigor in handling process flows and service hand-offs with partners, and a lack of clarity about the end-state operating model—what the operation will look like in 36 months. When plans stumble along these lines, implementation is delayed, service problems proliferate, and savings are deferred or minimal. One large media company learned all this the hard way when a piecemeal, ad hoc approach to an infrastructure-offshoring program forced its reimplementation from the ground up, with significant cost and time overruns. This company is not alone.

Getting infrastructure offshoring right