There's No Stopping The Offshore-Outsourcing Train - InformationWeek

There's No Stopping The Offshore-Outsourcing Train

Although the upcoming presidential election has aroused a wave of sentiment against offshore outsourcing, new research indicates the promise of low-cost labor will result in 40% more U.S. white-collar jobs moving offshore by 2005 than previously expected. And while the types of jobs moving offshore vary, it's anticipated that IT work will continue to be a prime candidate.

Forrester Research now says it expects that 830,000 U.S. service jobs will move to low-wage countries such as China, India, and Mexico by the end of 2005. Last year, the firm put that number at 588,000. The new study estimates that 3.4 million jobs will move offshore by 2015, up from 3.3 million predicted last year. Forrester analyst John McCarthy says the pressure on IT and business executives to cut costs is even greater than previously anticipated.

More Going OffshoreA downside is looming, however. As the demand for qualified IT workers in India increases among companies worldwide, prices of outsourcing services are going up by an estimated 15% per year, according to a recent study by human-resources outsourcing firm Hewitt Associates. "The arbitrage opportunity in India will eventually close," says Michael Treacy, chief strategist at Gen3 Partners, a provider of research-and-development outsourcing services.

That has some companies looking elsewhere. General Electric Co., which uses about 12,000 contract IT employees throughout the world, is looking closely at China as its next staffing hub. "The cost is better" than in India, says Steve Morrison, director of Global Delivery Centers for GE. Morrison says, however, that most Chinese services firms lack the scale or process controls to successfully handle large IT projects.

This story was updated on 5/26/04

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