It Was Only a Matter of Time...
November 13, 2007 Increasingly we hear that cost reduction is less of a factor when companies go offshore. While companies will continue to benefit from lower cost of labor in the developing world, expectations of saving up to 60% are no longer realistic... The following article says that although outsourcing is still a major part of corporate IT strategy, it's still not the main reason to outsource anymore.
IMHO, companies that go offshore just to save a few bucks eventually regret their decision... bad. You typically get what you pay for. Many companies that send software development work to the lowest bidder end up with useless code and months of rework. They didn't realize that the sweatshops they sent their work to either couldn't get the job done, or weren't getting paid enough to put the really good developers on the project.
Anyways, it's good to see that CIO's are making outsourcing decisions based on the agility and responsiveness provided by outsourcing rather than just cheap labor.
Saving money is no longer the number one reason for IT outsourcing, according to new research released today. Instead, three-quarters of UK chief information officers (CIOs) cited responsiveness and flexibility as the primary drivers behind their decision to outsource. The ninth annual outsourcing survey, carried out by recruitment and IT outsourcing consultancy, Harvey Nash among 650 senior level IT professionals from businesses across the UK revealed that confidence in IT outsourcing is booming as businesses increasingly recognise the potential strategic benefits as well as operational cost savings. India and China continue to thrive, taking the two top spots respectively and Vietnam continues to perform well, rising to seventh place behind other emerging destinations such as Brazil. The top ten offshore outsourcing destinations as revealed by the survey are India, China, the US, Malaysia, Brazil, the Philippines, Vietnam, Poland, Romania and South Africa respectively.
Over half (53 per cent) of CIOs expect their IT budget to grow next year and half plan to spend more than 10 per cent of it on IT outsourcing programmes.
At the same time the survey suggests confidence and satisfaction in offshore software development service providers remains high, as the vast majority (93 per cent) of CIOs plan to maintain or grow their current offshore software development activity in the next 12 months, while two thirds (65 per cent) are satisfied with the service they receive.
And even those who haven't been completely satisfied said they still had plans to invest in anticipation of improved service levels.
Paul Smith, global managing director of outsourcing and software development for Harvey Nash said the research findings clearly demonstrate that "IT outsourcing is here to stay".
The outsourcing consultancy also said a rise in mixed model offshoring has also seen a change in the geographical spread of IT outsourcing, where South Africa and Canada have both dropped down the list of most popular offshore destinations.
"As the reasons behind the decision to outsource change, we will also begin to witness a dramatic change in outsourcing hotspots. Eastern Europe and Vietnam have already made a significant impact on the IT outsourcing map as businesses become more tactical in their approach to offshore development," said Smith.
Reader Comments (3)
Unfortunately the companies who think offshore is equal to cheap labor are the ones who had bad experiences.
Yes, offshore outsourcing is about more than cheap labor. It's high value, not low cost.
www.software-sweatshop.com