The cost savings of outsourcing can easily be outweighed by not thinking through the full operational, legal and commercial implications, warned KMPG.
KPMG sourcing advisory partner in its financial services practice, John Machin, said: "The focus of many corporate agendas is inevitably cost-saving, but too many may make the leap from cost-cutting to outsourcing, to offshoring, to India - without necessarily taking time to properly work through the myriad of issues involved.
"These include potential corporate structures, withholding taxes, VAT, legal, employment, regulatory and most importantly, implementation issues.
"These can at best negate all the value in the deal. At worst, they can create bigger headaches than the problems they were designed to solve."
KPMG said it had produced a publication, called `Front Line: realising the benefits from sourcing decisions', which it said examines several key areas relating to offshoring.
The publication highlights location, outsourcing partner, due diligence, implementation, flexibility, tax compliance, VAT, transfer pricing and employment law and TUPE regulations as issues which need to be addressed when considering outsourcing.
Machin said: "Such major change is certainly not for the faint hearted, and making the right sourcing decision is probably one of the stiffest tests of corporate confidence a company can face.
"In order to avoid creating double the trouble, companies must ensure that stakeholders and customers actually get to realise the benefits, whether the deal lasts a year or a decade."
