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Is Outsourcing on the Wane?

Is Outsourcing on the Wane?Yesterday on InformationWeek's CIOs Uncensored blog, John Soat mused about the fate of outsourcing. 10 years after the practice exploded onto the business world, is sending work overseas growing more or less viable?

Arguing for the continued viability of outsourcing is a recent InformationWeek article entitled "The Second Decade of Outsourcing." Which suggests, obviously, that there will be a second decade. Author Mary Hayes Weir cites some statistics:

Two-thirds of companies on the InformationWeek 500 list of business technology innovators say they do offshore IT outsourcing, up from 43% in 2004. Consulting firm NeoIT estimates that 75% of the world's 2,000 largest companies are engaged in offshore outsourcing, with 20% of their IT budgets spent on offshore contracts; it predicts that could rise to as much as 40% of budgets in the coming years.
But that's not the final word on the question. Business processes outsourcing firm, Hewitt Associates Inc., just announced large losses, following the discovery that the cost of fulfilling outsourcing contracts was going to be much higher than anticipated. Though Hewitt's troubles could be unique to the company, the Society for Information Management has recent research that suggests spending on outsourcing is going down generally. Soat cites the organization's latest survey of 130 CIOs and IT executives, which suggests,
that maybe "The end of offshore outsourcing" is a hot topic after all. Almost 60% of the SIM survey respondents said that less than 10% of their 2007 IT budgets had been allocated for outsourcing of any kind, and 73% said that no amount of their 2007 budgets -- 0% -- had been allocated for offshore outsourcing.
This year only 1.1% of IT budgets went to offshore outsourcing, compared to 4.23% in 2006. So how about it, is spending on outsourcing going up or down at your organization? And do you think this is representative if a broader trend?

(Image of help wanted sign in Bangalore by Paul Keller, CC 2.0)

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