Survey Shows That Rates of Overseas IT Outsourcing Are Low
Tuesday, March 4, 2008
Posted by: Robert Half Technology
Despite the attention focused on the outsourcing of technology jobs overseas, a recent study indicates that the majority of U.S. companies are not engaged in the practice. In a survey by Robert Half Technology, 94 percent of chief information officers (CIOs) polled said their companies do not outsource IT jobs outside the United States. Most don't see that changing, either, with 86 percent noting that they will continue with their current strategy over the next two years.
Any future growth in offshore outsourcing is likely to be attributed to organizations already doing so, not from those just initiating the practice. Forty-three percent of CIOs surveyed from firms that already rely on overseas IT outsourcing plan to increase the amount they do in the next two years, while 13 percent expect to decrease levels.
Challenges to Outsourcing
Overseas technology outsourcing is more common at large companies (500 or more employees), where 11 percent of CIOs surveyed indicated that their company engages in the practice. Just 5 percent of CIOs at small firms (less than 500 employees) said they outsource. This may be because it can require a substantial investment to investigate vendors and then teach them about the organization's products, management style and quality control. Larger companies are better positioned to realize economies of scale due to their size and are more likely to have the financial resources to devote to this type of undertaking.
Many organizations that have attempted offshore outsourcing have reported that they experienced management-related challenges. More than half (59 percent) of executives surveyed whose firms had stopped overseas IT outsourcing said it required too much oversight and management. Thirty percent said cost savings were never realized and 23 percent said the quality of work wasn't good enough.
Which Jobs/Functions to Outsource
Companies are outsourcing a wide range of positions, including: technical support centers; programming/development jobs; engineering/programming positions; research and development facilities; and IT support jobs for overseas-based manufacturing facilities.
The functions selected for outsourcing tend to either have repetitive job responsibilities and/or work that can be done somewhat independently, with less need for ongoing, direct involvement with other corporate employees.
A number of technology jobs simply aren't suitable to outsourcing overseas. Network security positions are a prime example. Most companies want to maintain direct control over private information contained in their systems and aren't eager to send this oversight abroad.
Project management and strategic planning roles also aren't ideal for outsourcing. Frequent communication and collaboration within an organization is often necessary to effectively evaluate a proposed initiative, and start and complete it successfully. These positions also require a solid understanding of the company's internal policies, protocols and business objectives. Time differences, communication concerns and conflicting management techniques could easily make outsourcing a liability.
Making Outsourcing Work
Businesses considering offshore IT outsourcing need to honestly assess their abilities to take on the practice and manage it effectively. For starters, new jobs or even departments may be necessary to oversee the vendor relationship. Selecting the right vendor, dealing with contracts, training workers and managing remote work teams will take considerable time, perhaps more than existing staff can incorporate into their schedules. It may be necessary to hire a full-time project manager to coordinate outsourcing activity.
Companies also need to give adequate attention to security and privacy issues. Intellectual property risks such as the enforcement of patents, copyrights and trade secrets can require special strategy and oversight. To reduce the potential for problems, it's useful to benchmark best practices from organizations that have outsourced successfully.
When evaluating vendors, companies should look for a track record of measuring employee turnover and retaining staff. The organization should also offer long-term career opportunities to its IT professionals and have succession plans in place.
To minimize the potential for management challenges, it can be beneficial to offer specialized instruction to supervisors who will lead overseas teams. Managing people who have different cultural heritages, backgrounds and experience can be an unfamiliar task and additional training can help better prepare internal staff for this responsibility.
Overseas IT outsourcing may or may not be right for your company. Organizations considering the practice should take time to learn what other firms have encountered in the process. Conducting thorough research can ensure the right staffing decisions are made and optimal results are achieved, both at home and abroad.
Robert Half Technology is a leading provider of IT professionals for initiatives ranging from e-business development and multiplatform systems integration to network security and technical support. The company has more than 100 locations in North America, South America, Europe and the Asia-Pacific region, and offers online job search services at www.rht.com.