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As media interest in offshore outsourcing begins to wane, a trio of industry researchers are continuing to debunk the myths of a business process that has cut the US IT workforce by 3 per cent. Gartner this week declared that contrary to corporate sound bites about offshoring, most large organisations in Europe pursue offshore deals purely to cut costs. Sourcing new skills or technology expertise is the second most likely factor that pushes Western IT organisations offshore, the industry analyst said, after polling almost 1,000 IT decision makers. Joint second on the list of reasons large companies outsource their IT, whether it be data center, desktop network or enterprise applications, is the aim of injecting greater elasticity into the overall business operation. Yet an overwhelming majority of companies admitted achieving ‘cost take out’ was the primary driver, with larger organisations much more likely to take this view than their smaller counterparts. Almost an equal number of companies said gaining more efficiency was a key driver, but markedly fewer said they offshored IT to accelerate or improve a business outcome. Alongside less of these ‘enhancement’ deals, the analyst noted fewer companies partnering with overseas services for ‘transformation deals’ – where companies offshore to bolster their competitiveness. The consensus among IT leaders overseeing offshore deals, irrelevant of the objectives, showed data security or privacy issues around the potential high costs of outsourcing as the two most common deterrents. Gartner reminded Western companies that only with a combination of cost control and reduction, underpinned by the goal of maintaining consistency in service delivery, would they achieve their foremost goal of ‘cost take out.’ “One of the great clashes in the market today is driven by the dominant use of outsourcing to cut costs along with requirements for customized services,” said Allie Young of Gartner’s Sourcing division. “Companies have a growing concern about losing control of their intellectual capital and the business knowledge of key employees whose jobs or roles may be threatened by outsourcing, particularly when downsizing occurs. “As part of a sourcing strategy, organizations must carefully examine the goals they wish to reach from outsourcing, but equally their concerns.” If such scrutiny is internally applied, the analyst said companies will not only develop a more coherent strategy, but they will educate other “constituents in the organisation about realistic outcomes and possible false assumptions or misperceptions that it holds about outsourcing.” Earlier this month, the OECD reported one in five IT jobs could be affected through offshoring, though it added the long term economic benefit to the country outsourcing outweighs the interim losses. Overall gains in productivity created by partnering with offshore companies would coincide with further economic growth such as new job opportunities in the client country, the Organsiation for Economic Co-operation & Development said. Yet its latest report conceded there appear, “no clear patterns as to how offshore outsourcing affects productivity, and that much depends on both sector and firm-specific characteristics. “There are some indications, however, that positive productivity effects from foreign material sourcing depends on the degree to which firms are already globally engaged, but also that such engagements generally could be close to their optimum level in developed economies.” In addition, existing data suggesting that between two and three per cent of the US IT workforce has been lost thanks to offshore service providers has been recently clarified, by the Association for Computer Machinery. Their offshore study, published in February, reiterated that there are more IT jobs available today in the US than at the height of the dot com boom. “This trend is evident despite a significant increase in offshoring over the past five years,” the report said. Adding, “In fact, U.S. IT employment in 2004 was 17 per cent higher than in 1999, and the… data reveals that IT jobs are predicted to be among the fastest-growing occupations over the next decade.” Mar 17, 2006 Email this article Printer friendly page Previous Page
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