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How will IT outsourcing play out in companies’ recovery plans?

As IT outsourcing is one of the core areas I cover for, I am, of course, interested in how both offshoring and onshoring will fare in the coming months.

According to some soon-to-be-published analyst research on where IT outsourcing is going in the second half of 2009, although most enterprises have put IT outsourcing more on the back burner recently, the tide is about to change. Among the analysts’ conclusions: Companies’ outsourcing engagements will be more global in nature in a post-recessionary environment and will not involve significant upfront capital expenditure.

Meanwhile, just published a quick guide on IT outsourcing trends in 2009. It covers trends since the end of last year, when the drop in contracts began, and offers advice on how to properly structure your IT outsourcing contract for success in the recession, as well as the Satyam scandal and the rise of insourcing.

So, as the second-half play gets under way, the stock market is surging (just today, the Dow Jones Industrial Index climbed past 9,000) and the number of jobless claims appears to be dropping. There is definitely chatter that maybe, just maybe, we’ve rounded the corner on the worst of this recession.

Would a turnaround now change your outsourcing strategy? Did the Satyam scandal have any impact on how you do business? Are you considering insourcing as an option? Budget season is approaching for many enterprises, so this is an ideal time to examine these strategic questions.

I want to hear from you, our readers. If you’ve got stories or advice to share with your peers, please email me or find me on Twitter at @rlebeaux.

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Hello Rachel, First, would like to congratulate you in striking the topic of the moment. I do not take part in making decision for any company about the questions you ask but I would like to highligh a few blocks which may trigger a decision either way. Outsourcing has always been a double edge sword.It can give you direct cost benefits but not at the expense of your IT Stability, Independence and Integrety.Therefore it becomes very important to understand the difference between what we 'want to' and what we 'can' outsource. In current economic circumstances, I see Outsourcing as a strategy pregnant with opportunites. It would help IT departments as follows : A) Reduce the expense to revenue ratio - Increase the revenue or value delivered by IT to business B) Meet Business Expectations - Increase reliability of systems - Improve time to market - Improve customer satisfaction C) Improve Quality of service - Continuous Improvement - Technological agility - Access to Industry Best Practices D) Improve Flexibility and Scalability - Provide agility to IT solutions - Access to Large pool of resources for new projects E) Reduce Fixed Cost - Go for Dynamic cost of operations (eg. Per ticket AMS cost) - Access to Global Delivery Models If the above points helped you or any other reader in your decision making or in case you wish to enrich my comments, you all can mail me at Thanks - Sarvesh
Thanks for weighing in Sarvesh I agree with your assessment of some of the ways in which outsourcing can reduce IT expenses for U.S. organizations. You mention that outsourcing is a double-edged sword and there are downsides to it as well - what do you think are the most important ones for CIOs to be aware of?
Hey Rachel, Yes, IT outsourcing is surely a double edge sword as it offers of lucrative cost saving but at the same time it need to be planned and executed efficiently. There are a lot of risk and I would not be able to script all here but I will draw your attention on three major risk one should keep in mind while on an outsourcing journey. Some of the grey areas which it houses are : a) Change Management - Here you are changing the way your organisation work. Therefore you need to make this number one priority of institutionaling the change process. Outsoucing involves changes - from people to processes to organisational dynamics. Choose a partner who focus not only on Technical Scope but also on softer aspects which ultimately play the vital role in acceptance of that change. b) Quality - Outsourcing is only fruitful if an organisation is able to strike a balance between Qyality and Cost. Its never a business of low cost only. There are certain phases which cannot be done from Offshore without impacting quality, though it would save a lot of cost. (Eg. Business Blueprint in SAP implementation or Defining Global template in a roll out) Hence CIOs should focus on selective outsourcing instead of Total Outsourcing c) Governance - If my performance is proportional to someone's action, I better watch him/her. In any outsourcing (large or small) key aspect is governance of the program. Its an investement one need to make very readily so that adherence to the objectives of the program are well communicated, tracked and measured. No Program can be successful without a solid governance mechanism in place I would request if this and my previous post can be communicated to all audience/members here so that it may strike a more wide discussion and some wonderful ideas can enrich us. regards, - Sarvesh