Outsourcing: Come and Gone

Large firms that have fueled the global Information Technology outsourcing boom and have put developing countries such as the Philippines on investors’ radar screens are getting picky. “We do believe that the boom years for IT outsourcing growth have come and gone”.

Nowadays, buyers are getting more selective and strategic in the way they approach outsourcing and, as such, the pace of growth is slowing. Buyers are still prematurely terminating contracts, and questioning the value of 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.

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.

-The complexity of managing and measuring outsourcing projects and relationships overshadowed the benefits.

This however does not signal the death knell for IT outsourcing. The industry is alive and will continue to grow well into the future, although at a slower pace.

If this situation continues, maybe this will be the end of offshore outsourcing because it lessens the quality of IT outsourcing rate to all buyers.