Commentary

Paul McDougall
Editor At Large, InformationWeek  

Tech Pros Get Ready: We've Only Seen Tip Of Outsourcing Iceberg

In the United States, there's been much hue and cry about the thousands of tech jobs that have been offshored to India over the past couple of years. But viewed in football terms, outsourcing is only in the first five minutes of the first quarter. Get ready for tens of thousands more American IT jobs to head overseas in the next few years.

In the United States, there's been much hue and cry about the thousands of tech jobs that have been offshored to India over the past couple of years. But viewed in football terms, outsourcing is only in the first five minutes of the first quarter. Get ready for tens of thousands more American IT jobs to head overseas in the next few years.To fully understand this trend, it's important to get a clear picture of where things currently stand. Outsourcing has been such a hot-button issue that there's a general feeling out there that any job that can be outsourced already has been. Nothing could be further from the truth.

Yes, Indian outsourcers like TCS, Wipro, and Infosys are enjoying torrid growth rates--routinely posting year-over-year quarterly revenue gains in the range of 40% to 50%. But, to date, these firms have captured only a miniscule portion of the IT services market. According to research firm Technology Partners International, all Indian vendors combined owned just 6% of the market in 2006. They've got a lot of room to grow.


More Global CIO Insights

White Papers

More >>

Reports

More >>

Webcasts

More >>

Additionally, respondents to a recent Merrill Lynch survey of CIOs said that, on average, only 1.9% of their outsourcing budgets are spent on offshore services. The point is, the bark over offshore outsourcing has been a lot worse than the bite--so far.

But some recent data and industry news indicate that this may be about to change. Research firm Forrester last week issued a blockbuster report that concluded that global outsourcing will become the dominant form of IT delivery by 2012. "Outsourcing is now viewed as more than just an available tactic," according to the report by Forrester researchers Andrew Parker and Tom Pohlmann.

More than half of the IT execs the authors surveyed said IT and business process outsourcing is key to their companies' business strategy going forward. "If a third party can do it cheaper and at least maintain quality, buyers will continue to bite," said the report.

Beyond the numbers and surveys, there's anecdotal evidence that CIOs are now looking to place offshore parts of their operations that so far have been largely immune to outsourcing. Specifically, I'm talking about infrastructure management. The thinking until now was that provisioning and maintaining servers and other hardware required on-site personnel. But technological innovation and cheap bandwidth have changed that.

"We can now handle everything remotely except maybe deskside support," TCS executive VP N. Chandrasekaren said during a meeting we had earlier this week. "Infrastructure outsourcing is going to be huge for us," he said. Want proof? Last week U.S. pulp and paper giant Kimberly-Clark turned over the management its IT infrastructure to TCS.

There's lots more data and news just now emerging to support the notion that offshore outsourcing-a relative trickle to date-could soon turn into a torrent. Are you ready?


Related Reading




Currently we allow the following HTML tags in comments:

Single tags

These tags can be used alone and don't need an ending tag.

<br> Defines a single line break

<hr> Defines a horizontal line

Matching tags

These require an ending tag - e.g. <i>italic text</i>

<a> Defines an anchor

<b> Defines bold text

<big> Defines big text

<blockquote> Defines a long quotation

<caption> Defines a table caption

<cite> Defines a citation

<code> Defines computer code text

<em> Defines emphasized text

<fieldset> Defines a border around elements in a form

<h1> This is heading 1

<h2> This is heading 2

<h3> This is heading 3

<h4> This is heading 4

<h5> This is heading 5

<h6> This is heading 6

<i> Defines italic text

<p> Defines a paragraph

<pre> Defines preformatted text

<q> Defines a short quotation

<samp> Defines sample computer code text

<small> Defines small text

<span> Defines a section in a document

<s> Defines strikethrough text

<strike> Defines strikethrough text

<strong> Defines strong text

<sub> Defines subscripted text

<sup> Defines superscripted text

<u> Defines underlined text

InformationWeek encourages readers to engage in spirited, healthy debate, including taking us to task. However, InformationWeek moderates all comments posted to our site, and reserves the right to modify or remove any content that it determines to be derogatory, offensive, inflammatory, vulgar, irrelevant/off-topic, racist or obvious marketing/SPAM. InformationWeek further reserves the right to disable the profile of any commenter participating in said activities.

Disqus Tips To upload an avatar photo, first complete your Disqus profile. | View the list of supported HTML tags you can use to style comments. | Please read our commenting policy.
T-Shirt Giveaway T-Shirt Giveaway: Each week we're selecting one great comment from our readers. The author of the comment will receive an InformaitonWeek Community t-shirt. So get posting!
Subscribe to RSS

Resource Links