December 9, 2004 4:14 PM PST

Offshore outsourcing set for a big year?

How big a deal is offshore outsourcing? Depends who you ask.

Research firm Gartner published a study Monday saying "offshore outsourcing isn't as widespread as people think," with lower-cost locales accounting for less than 3 percent of money spent on global information technology services this year.

Gartner projects that figure to grow but remain a relatively small fraction of total spending. By 2008, spending on IT services delivered through "global sourcing" will reach about 7 percent of a $728 billion total market--or roughly $50 billion.

A more bullish view came Thursday from NeoIT, a consulting firm that advises clients about offshore projects. NeoIT "foresees a big year for offshore outsourcing growth in 2005" and predicts that more than "80 percent of the Global 2,000 will have an offshore presence by the end of the year."

Although the studies do not necessarily contradict one another, their differing tones reflect a broader set of conflicting opinions about the hot-button topic. Comprehensive information about the scale and impact of offshoring has been lacking, but Congress recently passed a bill that would set aside $2 million to study the issue.

Defenders of sending high-skilled work to countries such as India and the Philippines say it ultimately benefits the U.S. economy and its workers. Critics claim that the practice eliminates well-paying jobs and threatens the nation's long-term technological leadership.

Although wages can be much lower outside the United States and Europe, the overall effectiveness of shipping work abroad has come under scrutiny.

"Over 40 percent of offshore initiatives will not yield anticipated savings, scale or risk diversification," NeoIT said in its predictions for 2005. "The key reason for these disappointments will not be due to supplier capability but buyer preparation and management."

Despite predicting a large proportion of deal duds, NeoIT said it "sees increasing acceptance for offshoring as a foregone conclusion for multinational corporations that must keep pace with global competition, global supply and global delivery models."

Although much attention has been put on the way offshore projects can eliminate U.S. jobs, Gartner's report indicated that tech professionals should be more concerned with the growing automation of computer systems. "Utility computing will have (a) greater job impact than offshore outsourcing," the report said.


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This topic of offshoring seems to be a growing issue and concern. Recently, an expert (John Harker, CEO of In-Focus Systems) spoke on the issue, and it was recorded. It's available for free viewing on the web at:
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Posted by (1 comment )
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but what about jobs vs spending?
I think it's somewhat minimizing to look just at the % of IT spending. Everyone knows what you pay for a US worker, you can get 2-3 workers elsewhere. So multiply that times 3% to see how many US jobs are lost. Do the same for 7% in 2008 and you get the picture...
Posted by aabcdefghij987654321 (1721 comments )
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Outsource to War
The outsource issue is not new. The steel industry, tool &#38; die, many mfg's have eliminated jobs and moved operations overseas. Yet, our economy keeps marching on. If you look at the last 3 recessions, you will see that the time required to recovery is increasing. Additionaly, there are fewer dual income families. This is already creating a greater divide. The middle class continues to erode. Look at the last election. America now has 2 completely different views concerning the direction our country should move. This should be read as a warning. It's issues that we cannot control, that breed frustration and anger that ultimatly brought on the Civil War. We best find a solution to this outsourcing issue.
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Pummeled by cheaper labor costs abroad, the North American contact center outsourcing industry can expect a resurgence in the next two years, according to a recent study.
Backlash against offshore outsources, the emergence of home-based agents and vertical market expertise will all contribute to the growth in the North American market, according to the 2006 North American Contact Center Outsourcing Market Report from West Orange, N.J.-based DMG Consulting LLC. In fact, the Canadian contact center outsourcing market is projected to grow by 5% to 8% to meet increased demand in 2006.

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Posted by samuldesuja (1 comment )
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