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Magazines > ONLINE > July/August 2008
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Vol. 32 No. 4 — Jul/Aug 2008

Investigating Outsourcing and Offshoring Research
By Carol Ginsburg and Willem Noorlander

The question of whether or not to outsource research is hardly new. A hot topic of discussion in the early 1990s, it seemed to be the new direction for large U.S. and global companies. Some companies have been actively involved in various levels of outsourcing or offshoring for more than 10 years.

Fifteen years on, you would think that questions around outsourcing would be resolved. However, today we have more questions than answers. Experience has taught us that some of the initial questions were not the right ones and that a number of original assumptions were wrong.


The current points of view on this subject are well-depicted in the song “Unwell” by Matchbox 20 ( The chorus, “But I’m not crazy I’m just a little unwell,” followed by, “I’m not crazy, I’m just a little impaired” sums it up well. The concept of outsourcing research is not “crazy,” it is actually based on several solid business concepts including workflow maximization, operational efficiencies, and cost optimization. In its present format, however, it is definitely “not well” and “impaired” if issues such as quality of work, staffing, attrition levels, cost/benefit analyses, and the required levels of administrative and management time are examined.

The terms outsourcing and offshoring mean different things to different people, and many regard them as synonymous. As background, and in order to understand the concepts that we will present, please note the following definitions:

Outsourcing takes place when the company chooses nonemployees, who will perform research for the company’s employees. The outsourced companies are generally located in another country (usually India), but there are numerous options. This may be done either directly, having company employees reach out to the outsourced firm through an internal process or workflow tool, or through the information services department of the company. In an ideal situation it would be transparent whether the research was performed in the corporate information center or by the outsourced researchers.

Offshoring takes place when the research work is sent to another country (again, usually India) to a group of researchers who are employees of the company. This is also referred to as a captive. Offshoring describes the relocation of business processes from one country to another, while being totally owned and managed by the company itself. Company employees can interact directly with the offshore employees, or the information services department can be the “go between” for the research assignments.


The critical question in the success of any outsourcing or offshoring project is determining what should be outsourced. This may vary from company to company. Following are three key factors that influence what work can be outsourced:

1. The skill level of the outsourced staff —This is the most critical factor and is often the reason for failure. Experienced researchers in offshore/outsourced companies are scarce. Complicated requests should not be sent to new, untried researchers. Routine, easily codified requests (company descriptions, credit reports, government [SEC] documents) can be sent to offshore staff. However, even that work must be carefully vetted before passing the results to the requestor.

2. Research request review process —The amount of time it takes the information services staff to review each request to determine if the task is suitable for outsourcing should be considered.

3. Information suppliers’ contracts —The level of contracts and their terms and conditions are important. Many information suppliers are unwilling to open their data contracts to either outsourcing companies or offshore locations. Each vendor’s contract must be individually negotiated. Without access to the proper level of information sources, an offshore location cannot perform the research.

The intent and benefits of outsourcing research is to move low-level and mundane research, often called the point-and-click-level research (or, as one person described it to us, the “the plain vanilla and boring” research), to off-location staff. This allows the onshore research staff to focus and work on interesting, challenging, and deep-thought research.

The biggest challenge is the time necessary to determine if the research task should be outsourced, to monitor the quality of the work, and to mentor the offshore/outsourced staff. This is not always successful and often leaves the requestor frustrated with low-quality results or a feeling such as “I could have done this request myself in the time it took me to explain it, review it, and send it off to the researcher.”


There are several options for how a company can outsource or offshore research and other business processes.

The most common approach is to hand off the process to another entity, which performs the work on the requesting company’s behalf. The location of choice for outsourcing has been India, which has a long list of companies offering these services, the major ones being Intergrent, Copal Partners, Evaluserve, Intergeon, and Office Tiger. Choosing the right company, one that is compatible with your company’s business approach and culture, is central to how successful your outsourcing experience will be. We know of one global bank that developed a test pack of 500 research requests. They gave this pack to four India-based outsourcing firms and made their choice based on research results. Other companies have picked their outsourcing firms based on general market research. Some firms have changed companies several times, or are now dealing with two or three Indian partners.

A number of large global companies are offshoring and have built and staffed a complete organization and infrastructure in other countries. In general, offshoring results in a higher level of control as compared with outsourcing. The staff is employed by the firm, and the firm controls the infrastructure with appropriate backups for power grids, telephone service, internet connectivity, and other similar factors.

Our research tells us that companies that offshore are more satisfied with the quality of the work and have better results than companies that outsource. However, captives are also more expensive, with costs roughly 30% higher than outsourcing. The higher cost is now getting close scrutiny and is causing companies to rethink what they will do going forward. In a Wall Street Journal article from Feb. 11, 2008, called “Rethinking the India Back Office,” by Jackie Range, it was reported that global firms with large captive operations are “looking to get out of part or all of the business by selling either to Indian companies that specialize in outsourcing services, to private equity firms or through initial public offerings.” The reasons include a sharp rise in India-based costs, the slowdown in the U.S. economy, and the weak U.S. dollar.

There are numerous options beyond India. In the last 5 years, companies have been outsourcing and offshoring to the Philippines, China, Eastern Europe, and, more recently, South America. The primary reasons are cost and a better cultural mix with U.S. and U.K. companies.

And last, but certainly not least, there are options within North America. A number of firms are now building research centers in lower cost locations with access to good labor pools in the U.S. Or, they are “in-sourcing” functions to U.S.-based firms, who have a staff of U.S. employees in low cost locations, an example being Fargo, N.D.


A global firm considering offshoring numerous research tasks and functions recently engaged BST America to perform a market study of other companies that have been involved with, or are considering, outsourcing or offshoring. The results of the study will be used to determine the model the firm uses for offshoring.

The study group covered 11 companies, including global financial institutions, large consulting firms, and global accounting firms. These are the specifics on the study group:

  • All of the companies were currently outsourcing or offshoring some level of research functions.

  • A majority of the firms were also offshoring other services, beyond research, at the same locations. Some firms had a very significant presence in India.

  • Five of the firms were doing this with their own staff, five were using local outsourcing firms, and one was using a combination of its own staff as well as external staff.

  • The majority of the firms were offshoring in India. Other offshoring locations were the Philippines, China, Czech Republic, and Chile.

  • Offshore staffing for research ranged from five to 150.

  • The majority of the firms had offshore facilities that were operational 6–7 days a week, 18–24 hours a day. A few firms had more limited hours, for example, those that mirrored U.S. operations.

  • More than half of the firms were using a single location; the others had various locations.

  • Several of the firms were looking at new and alternative locations, with a focus on Eastern Europe or South America.

The study required interviewing companies that outsourced or maintained a captive research facility, with the objective of getting good cross sections and permutations of current usage patterns and habits. The study group included U.S.- and U.K.-based global companies.


We used a list of around 25 questions as a baseline for the interviews, with the objective to learn and gain insight as follows:

  • Countries most often selected for offshoring

  • Partners deemed as delivering quality work

  • Types of activities typically done offshore

  • Workflow models used

  • Satisfaction with staff

  • Satisfaction with the quality of work

  • Attrition rates

  • Management issues, both within the U.S. and in offshore locations

  • Costs and savings

  • Organizational issues

  • Does the offshoring meet objectives, both as a valid resource and for cost optimization or containment


Following is a summary of key findings that were common across the study group:

  • For those firms using outsourcing, it is critical to do an in-depth review of firms in order to obtain a good fit relative to goals and business practices. Several firms have changed or expanded the number of local outsourcing firms being used.

  • All firms used workflow management tools. The tools were internally developed for this function or were modified from other tools already in place within the firm.

  • The level of research actually done offshore varied from firm to firm. Factors impacting this were the complexity of the research, assessment of the quality of local staff, and whether staff was captive or outsourced. This was a critical part of our discussions—what and how much research should be done offshore while still maintaining acceptable levels of quality.

  • Quality of staff and work performance is a major issue. We heard a wide range of commentary on quality, which was generally seen to be below the levels delivered within the U.S. and the U.K. This has an impact on the amount and the complexity of work that can be assigned. Further, it appears common that local staff have a higher perception of their value than their U.S. management believes. This leads to problems with local staff accepting work assignments that are beyond their capabilities. As a consequence, results can be below-standard. Most firms noted that they continually monitor quality.

  • Local staff needs more attention, reinforcement, and reward motivation than staff in the U.S. or U.K. There are many cultural issues that become factors in assignment of work, the quality of work, and the required level of supervision and management.

  • Staff attrition is well above that within the U.S. and U.K. The average term of employment was 9–18 months. There was one exception—where a firm has its own staff and limited hours of operations that mirror U.S. hours, the attrition rate was in the 2-year range.

  • Level of management involvement and support was a major topic of conversation, both at the local level and in the U.S. and U.K. It was unanimous that there were greater requirements for U.S. management than what was anticipated. This needs to be considered when doing cost/benefit analyses.

  • There are numerous issues with support for infrastructure, including problems with power grids, internet connectivity, and telephones. These problems were encountered less with firms that had their own buildings and staff.

  • Content usage and vendor management is a key area of concern. About half of the firms negotiated with their vendors for offshore usage, others were of the mind-set that they could fit this usage within existing contracts. Some of the vendors are more difficult than others when discussing this issue.


In addition to the findings listed above, there was a lot of commentary about cost/benefit analysis and finding answers to several key questions of cost effectiveness. Have companies met their cost reduction or saving objectives? The answer, like every other aspect of this issue, is mixed, vague, and in some case not determinable.

We can clearly state that the large cost reductions that were projected in the ’90s have not been met. When we did our research, no one told us that they were saving as much money as they had planned. Some firms indicated that they were not sure if they were actually saving any money, and several others told us that, at this time, it was not their objective to reduce costs; they were looking to keep costs fixed. A few firms indicated that they thought they were saving money, citing an example that the cost of one person in the U.S. or the U.K. funds three to four staff members in India. There are several factors that are clear and unarguable.

1. Operating costs in India are rising sharply; salaries are increasing by 12% to 20% per annum, as well as a general upswing in other operating costs.

2. Management and administrative costs are much higher than initially projected.

3. It can be very difficult to capture all associated and soft costs, which, if fully accounted for, would further reduce any savings.

Our research told us that there was a wide difference of opinion in savings and ROI between the senior management and/or partners and the middle/administrative/operational management who are actively involved in overseeing offshore operations. Generally speaking, we found that the more senior the person, the higher their perception that outsourcing was effective and resulting in cost reduction. Interestingly, one middle manager told us that it would be a career damaging act to oppose outsourcing, even though she had financial information that clearly showed that it would not meet the cost reduction goals of her firm. Her statement was, “This is what senior management wants, and either I get on the bandwagon with them, or someone else will.”


Just like sheep following each other across the road, most financial and consulting firms went to India to obtain low-cost, educated, and motivated research staff. Outsourcing companies that already handled technology and call center functions eagerly jumped into the business. It seemed like a win/win proposition for all involved.

However, things have changed. “Low-cost” is a relative term. One of our interviewees was told that having a staff of six in India making mistakes and repeating the research over and over was still cheaper than the cost of two research staffers doing it locally and getting it right the first time. Getting it cheap was more important than getting it right. We know that not every company feels that way.

Multiple companies competing for educated researchers in India results in high turnover and escalating prices. Often, by the time researchers are trained in the preferred methods of the employing company, they are ready to move for a pay raise. Loyalty to the outsourcing company seems to be missing. Attrition rates for the captive employees are lower.

Training also takes a lot of resources, including travel to India to provide on-site training to the research staff. In addition, the “hand-holding” that is required is more than what would be needed in a face-to-face situation in the U.S. or U.K. Often the company mentors are on the phone with the India staff several times each day. In fact, some companies have a function which requires one (or two) staffers to monitor all of the requests that are sent offshore. They manage the workflow and review every completed request before it is sent to the requestor.

Culture is another critical factor in evaluating the India outsourcing results. It is difficult to instruct or correct the India staff at a distance. Managers have also found that Indian researchers do not want to refuse any type of work, even if it is beyond their scope. This results in excessive back-and-forth discussions and time wasted at both ends. One interviewee told us that when she corrected one of the staff in India the individual called in sick for 3 days, upset at being corrected. This represents a large cultural gap.

Has India lost its luster? This is probably the only point where we can give a clear answer: Yes, it has.

Is this a good time to outsource or offshore research? We know of several companies that are planning to revise or revamp their current operations and others that are investigating starting up new or larger operations.

One key recommendation that we would make is to look beyond India. There are now a wide range of options on where and how to outsource. A company should evaluate all of these to be sure that they build an environment, or find a partner firm that meets business objectives and is a cultural fit with the firm.

The following is a list of factors that need careful consideration before the question of whether or not to outsource research can truly be answered:

1. Fully investigate what level of research can and cannot be outsourced.

2. Use a good workflow management tool.

3. Understand that it will be difficult to measure the quality of the work.

4. The operations will require more U.S. and U.K. management time than you think.

5. Training, both at the start and going forward, is critical to success.

6. Staff attritions will be a major and ongoing problem.

7. It is judicious to negotiate separate agreements with all appropriate information suppliers.

8. Set appropriate and attainable levels of cost/benefit and ROI. Be aware that this will be difficult to compute. Pay attention to soft or hidden costs.

Would you do it again?

In February, the New York chapter of the Special Libraries Association sponsored a panel called “Outsourcing Five Years Later.” It was a lively function with a high level of participation from audience members. Most, if not all, of the points discussed in this article were validated by the commentary from the panel as well as the audience, many of whom worked for firms that were currently outsourcing various functions and business processes.

At the conclusion of the discussions, someone asked the panel members the question, “If it were up to you, would you do it again, has it worked?” The answers from the panel, as well as some follow-up commentary from the audience, were again mixed.

Some of the positive commentary focused on the fact that outsourcing improves the work environment in the U.S. and the U.K., leaving better and higher-quality work for the staff in those locations. The negative commentary focused on the facts that there were issues with the quality of the work, high levels of management were required, and that they were not meeting cost reduction objectives.

During our market research we asked similar questions of the firms. The responses were very similar to those discussed at the SLA panel. We received a wide range of answers. Some indicated that it was a good idea. Others said, “In the long run, it was not worth it.” Some firms are still figuring it out.


However, in almost every case the mandate for offshoring came from the most senior levels of management. Many of the individuals that we spoke with told us they did not have a choice, that this was the wish and direction of the firm. There were a great many “lessons learned” from those who were several years into the exercise. The general tenor is that if asked to do so, most would certainly do it again, but they would look at a broader range of locations and set a different level of expectations.

In summation, let’s go back to that lyric from Matchbox 20’s “Unwell” song, “But I’m not crazy, I’m just a little unwell.” As we stated at the outset of this article, the concept of outsourcing or offshoring research is not crazy, but there are still a number of unwell, impaired factors that should be addressed and redefined.

As long as firms make their decisions based on sound business practices, analyze their options, and set reasonable expectations, outsourcing and offshoring will continue to be used by global companies.

Carol Ginsburg ( is senior consultant at BSTAmerica and Willem Noorlander ( is a partner at BSTAmerica.

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