Strategic CIO // IT Strategy
Commentary
1/23/2007
11:22 AM
Paul McDougall
Paul McDougall
Commentary
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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.

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?

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