Strategic CIO // IT Strategy
05:00 PM

Outsourcing's New Reality: Choice Beats Cost

Creative CIOs are getting not only savings but also added flexibility and specialized skills from their IT outsourcers. Just don't expect magic.

Where In The World

Even with rising costs in India and gains by IT outsourcers in Eastern Europe, Latin America, and other regions, India remains the top spot for offshoring. Among our survey respondents, 28% of their companies' outsourced work is done in Asia, while just 2% is done in Eastern Europe and 2% in Latin America.

Outsourcing isn't synonymous with offshoring; survey respondents say 60% of the outsourcing work done for their companies is done in the U.S. Says survey taker D.G. Brown, CIO at electronics manufacturer Sparton: "We use an onshore company after having major issues with an offshore company. The offshore company did not test, provided substandard product, and exhibited major communications gaffes."

Another downside to pure outsourcing, Ditmore says, is that IT organizations lose their institutional knowledge base. "There's no pipeline of talent coming up," he says. "You lose the context of how work is being done."

The most common reason IT pros give for not outsourcing? Forty-four percent said they have no need. After that, it's cost (26%), followed by quality of work (21%), lack of industry knowledge (16%), and the difficulty of managing these relationships (11%). The main reason Mott is reversing GM's historical reliance on IT outsourcing is to execute projects faster and cultivate auto technology expertise internally.

With all the pros and cons, it's no wonder that IT outsourcing is, and will remain, controversial--even if it has become more than just a cost-cutting move. Ditmore offers advice for fellow IT execs: "Everything in moderation. When you can get some advantages, absolutely. But to go fully into it and assume it's just going to work is naive."

chart: to what degree have these benefits been realized through IT outsourcing?

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User Rank: Apprentice
9/9/2012 | 1:52:48 PM
re: Outsourcing's New Reality: Choice Beats Cost
The article's example of CIO Mamatha Chamarthi is very amusing to say the least. On one hand, Mamatha Chamarthi complains that she can't find talented IT workers in Jackson, MI to staff her higer value add projects due to competition from the newly re-surgent GM (Auto Industry). On the other hand, we are expected to believe that HCL Technologies (low cost Indian outsourcer) will be able to staff close to 400 in Andrew, MI in their new Michigan Tech Dev Center nothwithstanding the afore-mentioned compettion from the likes of GM. The only way I see this work for HCL (given their own margin/business pressures) is the classic outsourcing model - HCL hires project co-ordinators and a few staff in Andrew, MI and ships the remainder jobs to low cost centers in India or the other parts of the world. I would expect Info Week to do some more detailed analytical analyses before presenting such info to their readers.
The example of Mamatha Chamarthi and Consumers Energy is simply to put a new spin on the decade old outsourcing trend t make it more to its palatable to US constituents.
User Rank: Apprentice
8/30/2012 | 1:25:27 AM
re: Outsourcing's New Reality: Choice Beats Cost
Perhaps IW can tap their offshore innovation partner for some excellent, cost effective work..barf.
Leo Regulus
Leo Regulus,
User Rank: Apprentice
8/29/2012 | 7:11:49 PM
re: Outsourcing's New Reality: Choice Beats Cost
Somebody's gone to a lot of work and written an excellent article. However,
You have made some client-unfriendly changes.
When we hit the 'Print' Icon, we expect to see the entire article as one page and relatively 'free' of garbage.
On this article, it was necessary to go to page 2 etc., etc. to get the whole article.
The result was also littered with garbage.
Couldn't you have at least given us the courtesy of a .pdf option?
Thank You.
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