Will Offshoring Hit the Proverbial Brick Wall in 2011?

Stan Lepeak, Managing Director, Global Research

The answer is a resounding “no.” In fact, EquaTerra research has found that offshoring will continue to grow, and grow faster proportionally than overall third-party services spend, with no wall in sight. For example, more than one-half of ITO buyers in Europe that are currently using near/offshore services plan to increase usage going forward, and less than 10 percent plan to do less global sourcing. Eighty-six (86) percent of FAO buyers globally use either near or offshore provisioning, and 60 percent plan to increase use of global sourcing going forward. And according to the service providers polled for EquaTerra’s 3Q10 Pulse survey, the most commonly cited activity was buyers pushing for more outsourced work to be performed in low cost/offshore locations, scoring at 3.71 on a scale of one-to-five, where one represents very uncommon/infrequently undertaken, and five represents very common/frequently undertaken.

The above primarily relates to the private sector, and Europe’s public sector, especially the U.K. government, seems to be taking a similar stance. For example, the U.K. government is leaning toward more offshoring and outsourcing under the new conservative government which is looking for shorter term fixes to cut spending by £83 billion to shore up the mounting debt load.

The U.S. public sector is the one anomaly in today’s offshoring market. The NGOs – such as World Bank, IMF, Inter-American Development Bank and African Development Bank – are evaluating or already involved in offshoring initiatives. But protectionism is, at least anecdotally, hurting offshoring in the U.S. government, ala the State of Ohio’s ban on offshoring. To counter potential protectionism problems, the top tier offshore service providers are aggressively pursuing U.S. government business by touting their onshore delivery capabilities. (And, given the election of Republican John Kasich as governor – and he is already being talked about as a presidential candidate for 2012 – we expect that issue to disappear.)

Overall, the growth of global sourcing continues to remain strong. Brick wall? Hardly!

One Response to “Will Offshoring Hit the Proverbial Brick Wall in 2011?”

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