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Outsourcing: the Hoopla, the Reality

Outsourcing IT to foreign countries is a big and emotional topic for a lot of people (especially in the United States), with career IT professionals now living in fear that their jobs will go to bright-eyed and bushy-tailed southeast Asians. Recent budget reports of several companies, however, seem to contradict the fears. Is it possible that the fear of outsourcing is at best exaggerated and at worst an outright lie?

TABLE OF CONTENTS:
  1. Outsourcing: the Hoopla, the Reality
  2. Why the Pay Raises?
  3. The Money Myth
  4. Full Disclosure
By: Akinola Akintomide
Rating: starstarstarstarstar / 3
March 14, 2008

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Consider the following numbers:

According to a SIMNET survey (Society for Information Management) of 130 top IT executives and CIOs, it was shown that 60 percent of these companies said that less than ten percent of their budgets was for any kind of outsourcing, and 73 percent said zero percent of their budgets were allocated for off shore outsourcing. SIMNET conducts these studies yearly and according to their yearly reports, offshore outsourcing allocations in IT budgets has fallen from 4.23 percent to 1.1 percent.

Dissonance

This brings a sort of "dissonance" to the media hype surrounding both off-shoring and outsourcing, but numbers don't lie. So how do companies fill their IT needs? It seems all the bushy-tailed, eager beaver types are not in the corner office improving up-time and solving open source support needs (it seems that's another fallacy). IT company Lab49 disagrees, claiming that companies can solve their IT problems by training and equipping their current staff for high quality tasks.

John Soat over at Informationweek.com believes that this dissonance needs to be studied more deeply to understand it. The hype does not seem to be supported by the direction in which budget money is going. He proposes that there be a conference call with participants from different survey groups, CIOs and CEOs who are in the business (I keep wondering about that. Will they all like each other? That's a joke by the way).

I prefer a more inductive approach. First reach a conclusion, then go back to look for reasons. In the field I work in I've discovered that companies do not enjoy outsourcing, mostly due to security reasons and employee loyalty. It is actually more cost effective in the long term to train your staff to solve problems unique to your organization, and also to buy enterprise editions of software, so that you can get support from the source instead of betting on risky software with no guarantee of support.

Basically, IT outsourcing is peaking. The reports are pouring in about General Electric selling their entire Indian operation for (gasp) one billion dollars. And for a simple reason: the pay scales are getting higher, the comparative wages are making US (or local if you are not in the US) IT support more costly, and you get the nearness factor to boot without the hassle of cultural differences. CIOs and CEOs have noticed these trends and are responding; the press as usual plays catch up.



 
 
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