Harvard Business School professors David Pisano and Willy Shih argue that overzealous offshore outsourcing can cripple a company’s ability to innovate. Pisano and Shih discuss what CIOs can learn from the manufacturing sector about how ‘not’ to approach offshore outsourcing.

CIO — As AIG (AIG), AOL (TWX), Dell, Target (TGT) and other companies sold or shuttered their wholly-owned offshore IT and business process centers over the past five years, outsourcing industry experts predicted that the offshore captive center model was headed for the history books. But, according to a recent research report by outsourcing consultancy and research firm Everest Group, the captive model is staying alive—and thriving.

CIO — Offshoring IT work to India, China, Eastern Europe, and even South America has been a staple of IT cost reduction. And by definition the Cloud means location independence. Generally speaking, they’re practically made for each other. But in CRM and related systems, there are good reasons to keep the work in-country, or even in your building. This isn’t just a matter of costs, but of business value and risk containment. Why? It’s all about the data. Compared to all other enterprise systems, CRM data has the highest chances of data quality problems. For example, in an accounting system, you’d never tolerate a duplicate invoice or a journal entry from an unknown source.

IDG News Service — The service quality at top Indian outsourcers is dropping as they scramble to hire staff to cope with an unexpected surge in demand, analysts said. Customers abroad are reporting that some outsourcers are sending staff with lesser experience than before to customer sites, leading to delays and poor quality. Outsourcers are even finding it difficult to provide people with basic skills like Java or .Net programming, because their “bench” of staff on stand-by is reduced, said Jimit Arora, research director at Everest Group.