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Developers think companies are going to outsource their jobs, but outsource experts believe development is going in-house. Meanwhile, contractors are advised to become project managers, so what is going on? According to a survey from Evans Data Corporation (EDC), 33% of enterprise software developers indicate they expect their companies to increase outsourcing next year while only 6% of companies expect to decrease outsourcing. The survey adds that only 9 per cent of respondents’ companies outsource development in order to utilize special expertise, a dramatic reduction from 44 per cent five years ago. EDC provides market intelligence based on in-depth surveys of the global developer population and not of management intentions. The survey is a summary of developer's perceptions of how their business will behave. Perhaps this is why the finding contradicts Compass, the management consultants, which says companies are mainly attempting to fill specific skills gaps, and according to John Leaman, management consultant, cost savings are only available to those willing to consider offshore developments. "It is harder to save costs onshore," he says. "The benefits are more likely to be a need for new skills, the flexibility of resources, and a desire to improve quality." "Companies used to outsource all of their development to a single company; the trend is now to outsource to several different service providers, with individual projects allocated to different suppliers with the specific skills required for the given project." Here, Leaman is backed up by the survey. Forty-five percent of respondents indicate that their companies outsource less than a quarter of development and only 7per cent said they outsource more than 50 per cent of their development projects. NOA, the National Outsourcing Association, believes bad experiences of outsourcing are fuelling a trend back in house. In NOA's research, 30 per cent of top outsourcing professionals felt that insourcing was a knee jerk reaction to bad outsourcing experiences. Martyn Hart, chairman of NOA, said: “If suppliers are going to retain and win business with the threat of insourcing looming, it is essential they take steps to understand their customers needs and wants. Past failures give suppliers the opportunity to see what went wrong and make sure it doesn’t happen again.” Compass reports that where customers have outsourced all their IT, only 33 per cent have been seen as successful, which would suggest outsourcing is not the IT nirvana companies have been seeking. But in all this froth, what happens to the contractors? Outsourcing has sometimes been good news for wannabe contractors, as the IT services firm is usually desperate to find personnel with experience in the sector in which the contract has been won. As IT staff are made redundant in the first firm, they are snapped up by the services firm as contractors or higher paid permanent staff. But Alan Rommel, corporate accounts director, Parity, says transfer of contractors to an outsourcer will often result in shorter contracts as the new management attempts to cut costs. "Offering them permanent posts," is a strategy he says, "particularly at the development and support levels." With markets expanding rapidly (see http://www.contractoruk.com/news/002260.html), any change is still likely to be good change for contractors. A new position means a re-negotiated rate and pounds-per-hour are on the up with only one fly in the ointment: offshore. There is a view that there are cost savings to be gained with offshore, says Leaman. "Day rates are as a little as a third of onshore rates." These rates have made many companies experiment offshore, but ironically this has had a hand in pushing up average rates. Parity has seen an average increase of 10 per cent on rates for each contractor on their books in the last year, and Rommel says this is partly due to the changing skills of contractors. He says there are fewer IT support staff and more procurement consultants and project managers. "There is an opportunity to increase business skills, otherwise contractors can find themselves marginalised," says Rommel. “The higher up the food chain a contractor goes, the less likely the role will be pushed offshore so contractors should be busy up-skilling to maintain their value to the business.” William Knight Aug 31, 2005 Email this article Printer friendly page Previous Page
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