Monday, February 11, 2008

Outsourcing Pendulum shift

Outsourcing can either be a way for a company to gain strategic altitude and rise to greater heights (or) unloading dollars that don't pay off ...”

Most business processes rely heavily on technology. Companies identified the capital, time and space-savings associated with reductions in staff, training, equipment and work environments as advantages of outsourcing IT. Gartner announced in 2005 that IT teams will shrink dramatically during the next five years as employers adopt competitively priced external suppliers for IT services ... And, employees lucky enough to stay in a job will find themselves dealing less with technology and assuming more of a business role by managing suppliers.Gartner's predicted IT staff numbers will fall 15 per cent by 2010 as companies realize the potential efficiencies of bringing in external suppliers. IT departments will find themselves under pressure from suppliers offering prices and levels of professionalism that are difficult to match.
"As IT skills become a more important component of business professionalism, in-house IS staff while be displaced,"

Gartner said in a statement. "Companies must start the process of evaluating their long-term options, decide whether - and how - to compete against external suppliers or re-structure to manage those suppliers" The changing nature of IT departments’ role means that by 2010 six out of 10 people affiliated with IS organizations will take-on business facing roles around information, process and relationships as they manage suppliers. Departments who do not outsource will increasingly have outsourcing forced on them, according to Gartner.

Organizations who do not adopt what Gartner calls "process-based delivery models" will see their service portfolios outsourced at a rate of 25 per cent each year.

The outlook for jobs in the European technology sector is good but the spectre of outsourcing looms ominously, according to the IT Confidence Study, conducted by Eurocom Worldwide and Simpson Financial & Technology PR (Simpson FTPR) in 2007, the report surveyed 217 senior executives across Europe about their views on the sector.

63 per cent of respondents expected the number of people working in the tech sector to increase over the next 12 months, compared to 58 per cent last year. Meanwhile, four per cent expect job losses during the year, as opposed to eight per cent last year. "The outlook for jobs is reflected in the fact that skills shortage is now listed as the biggest threat to the tech sector," commented Ronnie Simpson of Simpson FTPR.

Despite the need for more skills, Simpson warned that certain jobs in the industry are at risk of being outsourced to countries such as China or India. "The study finds that not only are traditional manufacturing jobs at risk, but increasingly service jobs are shifting to low-cost centres as well," he said.

These fears were shared by 81 per cent of the study's respondents who believe their country is losing tech manufacturing jobs to low-cost centres, with 58 per cent believing that service jobs are moving as well.

The jobs most in demand in the industry are software engineers followed by international sales, project management and local sales people. The report found that the divisions within the tech sector that are expected to see most growth over the next 12 months included IT security and customer relationship management.

As well as different types of IT outsourcing, key questions faced by IT directors when outsourcing IT services, include whether to offshore, nearshore, or onshore. Outsourcing IT does, however, present different challenges. Learning how to manage relationships with outsourcers, engaging in industrial relations disputes with outsourced workers and designing service level agreements are a few.

Significant Outsourcing activities

February 2008: Govt outsourcing IT to overcome skills shortage >>
January 2008: Shell to outsource hundreds of UK IT jobs >>
January 2008: UK firms continue to pick India for outsourcing >>
January 2008: AA brings datacentre back in-house to cut costs >>
January 2008: LogicaCMG creates new outsourcing division >>

November 2007: Deutsche Bank outsources to HCL Technologies >>
August 2007: Lloyds TSB to outsource 210 IT roles to India >>
July 2007: British American Tobacco outsources network security >>
May 2007: Tesco signs £18m IT contract extension >>
May 2007: Allianz signs outsourcing deal with Fujitsu >>
May 2007: Hewden updates network and services with renewed BT deal >>
May 2007: Dorset Council signs services deal for contact centre >>
April 2007: Vodafone consolidates to reduce spend on app development >>
April 2007: PWC reveals faults in Swansea Council's 83m outsourcing >>
April 2007: Indian outsourcers make inroads into continental firms >>
March 2007: Prudential looks to axe 600 jobs from UK in-house IT >>
February 2007: Lloyds TSB to cut 245 back-office jobs >>
February 2007: Credit Suisse considers massive switch to offshore >>
January 2007: NCR offshores ATM production >>

Source: The Register, Gartner, Simpson FTPR, Eurocom Worldwide

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