Offshoring: Everybody's Not Doing It

Ann All

As recently as a year-and-a-half ago, some analysts were expressing surprise at the continued growth of offshoring, which they called "quite astounding." At that time, IDC said it expected the offshore market to experience annual growth rates of 15 percent for the foreseeable future.


Forecasts like that, combined with numerous stories about companies with offshore initiatives and concerns over the possible loss of U.S. jobs to offshoring, lent an air of "everybody's doing it" to the practice.


Problem is, that's apparently an erroneous impression.


Back in May, a study from economist Jacob Funk Kirkegaard showed that just 4 percent of so-called "mass layoffs" in America could be attributed to offshoring.


And now Robert Half Technology says that a majority of U.S. companies it surveyed do not send IT work offshore, nor do they have plans to do so. According to a CIOUpdate story about the survey, 94 percent of CIOs do not engage in offshoring.


Large enterprises were far more likely than their smaller counterparts to offshore jobs, with 11 percent of CIOs of companies with more than 500 employees saying they do so. Not a surprise, says Robert Half Technology Executive Director Katherine Lee, as big companies are typically "better positioned to absorb the costs of both initial setup and ongoing oversight, and to benefit from economies of scale" associated with offshoring.


Many of the companies did seem satisfied with their offshore initiatives. Forty-three percent of CIOs whose companies are involved in offshoring plan to expand the practice over the next two years, the survey found, vs. just 13 percent who said they would reduce their offshoring efforts.


Of the companies that had engaged in offshoring but ended the practice, the biggest problem was excessive management and oversight requirements, cited by 59 percent of respondents. Other problems: unrealized cost savings and quality control, mentioned by 30 percent and 23 percent of respondents, respectively.

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Add Comment      Leave a comment on this blog post
Feb 18, 2008 1:05 PM Jay Roberts Jay Roberts  says:
I hope this is true. I am sick of baby sitting these idiots offshore. Try telling a chimp to code in C++. That's my challenge. Reply
Feb 18, 2008 1:27 PM Chimp Chimp  says:
Thanks Mr. Roberts,i think you came from outer space...isn't it? Reply
Feb 18, 2008 2:32 PM Ana Barun Ana Barun  says:
In the field of business and technology consulting for financial services, we have seen the offshoring model first hand. Software development projects can be very complex that require communication across many individuals and strong business knowledge in the industry you are serving. Offshoring is rarely successfull even when a detailed design is presented to the developer. We at CMC, hire all levels of software developers and architects and believe in team based appoach to projects - that's why we are successfull. I'm not surprised that everyone is not offshoring, I'm more surprised at those that are. Reply
Feb 19, 2008 10:46 AM Dr Vikram Venkateswaran Dr Vikram Venkateswaran  says:
This seesm to be a raging debate for off-shorig and against it. The roblem with off-shoring is that only if the processes are mature and stable can it be off-shored. Unlike the United states where employees work on the same system for years Off-shore destiantions like India employees would like exposure to different systems hence they are generalists unlike the United States where you would find more of specialists. Reply
Feb 19, 2008 7:06 PM Allan DeKoninck Allan DeKoninck  says:
There are probably a lot more companies that are engaged in offshoring than this article indicates. Many have sold off all or parts of their IT areas and are telling their consulting firms to do the off-shoring to "save money." This way the CIO can "honestly" tell stockholders and others that "their" company is not offshoring. Reply
Feb 21, 2008 2:41 PM Norman Wheeler Norman Wheeler  says:
Does anyone know if the offshored employeesor the parent company pay any income tax (or any tax) back to the U S Federal Govt? Reply

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