Thursday, June 23, 2005

Offshore Outsourcing trends

The offshore outsourcing working should be checked, since everyone’s excited about how well – or poorly – offshore outsourcing works, let’s take a look at what’s happening now, and what’s likely to happen over the next few years.
Let us say first that much of the fate around offshore outsourcing has already been sealed. How could this be? There are new reports that near- and off-shore outsourcing does not save as much money as many people assumed. Some reports suggest that quality is a continuing problem, and others complain about language barriers, competing processes and the management challenges that especially plague many off-shore outsourcing projects.
The fate may already be sealed for several reasons. First, the number of management information systems (MIS), information systems (IS), computer science (CS) and computer engineering (CE) majors has fallen so dramatically over the past few years that we’re likely to lose an entire generation of replacement technologists if present trends continue – and they show every sign of doing so. So as the previous generation continues to gray, there will be precious few new ones to keep the skills pipeline full. The obvious outcome is increased demand for the skills – wherever they happen to be.
A second trend that will fuel the demand for more offshore outsourcing is standardization and its cousin, commoditization. The industry is making increasingly less variant stuff work together. While Web Services and service-oriented architectures (SOAs) represent impressive technology they also represent freedom to those who deploy and support technology.
Vendor consolidation is also fueling standardization and commoditization, and if you believe the impact that SOAs will have on software development, support and licensing, the stage is set for the massive de-centralization of cooperative software components. If this playing field truly levels itself out, the door will open even further for outsourcers who will master the new architectures (as a natural extension from where they are now in applications development and integration).
The third trend to watch is “the end of corporate computing,” or the desire to buy services and rent applications rather than deploy and support them in-house. Nick Carr is at it again. In the Spring 2005 issue of the Sloan Management Review, he predicts the end of corporate data centers and the rise of “utility computing.”