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12/15/2003
02:58 PM
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Report: Offshore Outsourcing Often Still More The Exception Than The Rule

A Forrester Research report says most major companies have yet to outsource overseas and are just beginning to investigate it.

While every day seems to bring news of more IT jobs moving offshore--such as Monday's report in The Wall Street Journal that IBM plans to move as many as 4,730 programming jobs to China, India, and elsewhere--such stories may represent the exception rather than the rule, at least in the near term.

A recent report from Forrester Research, "Users' Offshore Evolution And Its Governance Impact," states that more than 60% of Fortune 1,000 companies have yet to outsource overseas or are just beginning to investigate relationships with offshore service providers in locations such as India, the Philippines, and Russia. "A lot of people view offshore as a done deal, like everybody's doing it, which I think is an overstatement today," says Forrester analyst John McCarthy, who authored the brief.

While acknowledging that outsourcing will continue to become more prevalent over the next few years, McCarthy contends that "it's taken on a bit of a fad mentality, where people view it as kind of a quick fix." The result, he says, is "unrealistic expectations about how long it's going to take to ramp up any meaningful investment or reliance on offshore."

With offshore moves realistically taking anywhere from 24 to 60 months or more, McCarthy suggests that successful management of offshore resources requires governance capable of adapting to the changing needs of the business relationship. "How well aligned are business and IT; are they at each other's throats all the time?" he asks. "How sophisticated are your IT processes? How rigorous are they? Are you used to things like service-level agreements? These all dictate how easy or relatively easy it'll be to manage the offshore provider."

IBM declined comment Monday on the Journal report, but did issue a statement saying that on a percentage basis, it expects its "hiring across the Americas to outpace the hiring in the rest of the world."

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