Gartner Predicts 8.1% Rise in Outsourcing Worldwide

"Although user organizations often have fundamentally sound procurement organizations to initiate outsourcing contracts, for many, their IT sourcing strategies and governance structures are still immature, lacking altogether or misaligned with enterprise objectives. Because these organizations lack the basic building blocks for successful vendor management and outsourcing success, expected cost savings and other benefits are difficult to obtain." (A.T. Kearney has found the same thing in its own research on offshore outsourcing.)

"In 2008, we expect to see some early adopters of multisourcing to consolidate around fewer providers to reduce their service integration costs and harvest the benefits of better relationship management with fewer strategic suppliers. ... Some organizations will consider prime-contractor outsourcing models or the appointment of new vendor management roles in their retained organizations."

"Buyers increasingly are moving work to lower-cost, offshore delivery centers. Although cost remains a major driver ... more-mature users are seeking ways to better support their business needs.

Indian outsourcing firms are growing by about 40 percent annually in the U.S. and 60 percent in Europe. But Research VP Ian Marriott suggests Indian outsourcers will have a tougher time competing with firms from other countries, like China

"Other countries will continue to emerge as challengers to India for a number of reasons. Strong demand is putting a strain on the available Indian labor force, while staff attrition and cost increases remain high. Global companies continue to accelerate their demands for a presence in countries other than India, and providers are seeking to expand their geographic footprint of delivery centers accordingly. More-sophisticated buyers are seeking a multicountry strategy to minimize risk and align nearshore and offshore delivery centers with their primary time zones."

CIO Insight will release its own data on outsourcing spending in early February. For more data on outsourcing and offshoring practices and problems, see CIO Insight's March 2007 study.

Posted by Allan Alter on January 14, 2008 10:51 AM