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IT outsourcing boom has come and
gone, study says
LARGE firms that have fueled the global information technology
outsourcing boom and have put developing countries such as India
and the Philippines on investors' radar screens are getting to
be picky, according to a recent study.
"We do believe that the boom years for IT outsourcing growth
have come and gone," said Brian Tumpowsky in a statement.
"Buyers are learning to be more selective and strategic in the
way they approach outsourcing and, as such, the pace of growth
is slowing."
Tumpowsky is co-author of the 2006 Global IT Outsourcing Study
conducted by Diamond Management and Technology Consultants (DMTC),
a Chicago-based IT management consulting firm.
DMTC's study reveals that buyers are still prematurely
terminating contracts, and questioning the value of onshore
outsourcing. They are also struggling with the basics of
determining what to outsource, measuring effectiveness and
managing a global pool of resources.
Buyers are concerned about contract renegotiations, extensions
and terminations to seek additional outsourcing opportunities.
In 2006, 8 percent of offshore buyers said they plan to decrease
their levels of outsourcing over the next 12 months. This is
compared to DMTC's previous study in 2004 in which none of the
buyers said they would decrease the amount of outsourcing they
were doing.
Firms are reining in outsourcing for three reasons: either they
mistakenly outsourced a process or function that is core to
their business and are now bringing those back in; their
provider over-promised and under-delivered; or, the complexity
of managing and measuring outsourcing projects and relationships
overshadowed the benefits.
This however does not signal the death knell for IT outsourcing.
DMTC said the industry is alive and will continue to grow well
into the future, although at a slower pace.
The pace of growth has declined significantly over the past
several years. In 2004, 86 percent of all buyers told DMTC that
they were going to increase their level of offshore
outsourcing--albeit at a slower pace than in years past. By
2005, that number had slipped to 70 percent and currently sits
at an all-time low of 64 percent.
The good news is, overall, the percentage of buyers satisfied
with their IT outsourcing decisions remains quite high, with 71
percent of buyers saying they were happy with their offshore
providers. In 2005, the offshore satisfaction rate was only 62
percent.
The study polled hundreds of senior executives mainly based in
the United States and Europe and studied industry trends over
the past 12 months in the areas of spending, buyer satisfaction,
outsourcing impact and leadership of the changing outsourcing
market.
Tumpowsky is arriving in Manila to present a preview of global
outsourcing trends and strategies for 2007 at the Makati
Shangri-La starting on Oct. 2.
--By Elizabeth Sanchez-Lacson
Inquirer
Last updated 06:18pm (Mla time) 09/16/2007
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