Risks in ESO
Though companies have been quick to spot the opportunity and are beginning to embrace ESO, there are a few key risks that need to be managed effectively:

• Highly collaborative processes mean that the challenges in developing and managing virtual global teams is even greater than in ITO and BPO operations
• Large number of deliverables, compliance requirements add to the complexity 
• Highly iterative and ‘what if’ oriented optimization makes standardizing processes and measuring productivity more difficult
• Very high domain knowledge requirement lowers the ‘employability’ and ‘trainability’ thresholds for vendors, making recruitment even more challenging
• High degree of knowledge transfer from client is essential. This implies greater transition times, higher transition costs, and longer lead time to savings
• Customer’s cost of exit is high, requiring a high level of commitment from the buyer.

As a result, careful planning, provider selection, transition management, and most importantly commitment from executive leadership is critical to the success of a strategic ESO initiative.

Conclusion
ESO provides a great opportunity to the organizations to develop strategies that significantly reduce the time to develop and market new products at a lower cost. In the current economic environment, this will definitely provide organizations with a new competitive edge. For this reason, the offshore ESO opportunity looks interesting and, we believe, is likely to grow very quickly over the span of next five  years.

But, while the opportunity to reduce time and cost is enticing, and from the supplier’s perspective the business metrics look good, buyers should enter a relationship with an abundance of caution, understanding that outsourcing core business processes will require significant investment by the buyers, and with the realization that while the overall numbers for the global resource pool appear high, recruiting a strong, skilled team will be hard, in an environment where competition for talent is perhaps even greater than the competition for customers.     
[Contact the authors at dsinha@bniservice.com or pkm@vsnl.com to leave feedback on this article]