Offshoring: More fret than threat?

This year’s survey participants cite a wide range of projects underway and a broad set of challenges facing them in the coming year. But there is one area that our respondents clearly aren’t too concerned about, despite the persistent news buzz: offshore outsourcing of application development projects.

A scant 5 percent say that they are currently using outsourcing heavily in their organizations and another 17 percent say they are outsourcing “somewhat.” But fully 59 percent of those surveyed say they have no plans to utilize outsourcing for their development needs in the near future, looking as far out as the next 12 months.

Similarly, between 40 and 50 percent of respondents indicate not only that outsourcing plays a small role in their organizations, but that in fact they are using no outsourced resources whatsoever in their application development, maintenance, or integration efforts. Even fewer say they rely on outsourced QA and testing of enterprise applications, with 63 percent reporting that they outsource none of these activities.

Although these results may seem counterintuitive, they are in keeping with other recent InfoWorld research. In our 2004 InfoWorld Compensation Survey, 49 percent of respondents indicated that their organizations are not currently outsourcing any IT activities. The majority of the work is handled locally, with 85 percent of staffing needs met by full-time employees and another 11 to 12 percent filled by U.S.-based contractors — and no changes were planned for the next 12 months.

The fact that InfoWorld readers seem reluctant to test the waters of offshoring may be attributable to growing familiarity with the challenges and process hurdles inherent in overseas outsourcing. Respondents who say they are employing outsourcing at present cite time-zone differences and organizational difficulties as top concerns.

“Many of our developers are in India. The time difference between there and the U.S. presents special challenges,” explains on respondent. “We have on-site, outsourced, and off-site offshored development teams,” says another. “Communications are tricky.”

These challenges are not insurmountable, but they detract from the perception of outsourcing as a low-cost, drop-in replacement for in-house resources. Instead, organizations considering the offshore route must weigh the cost savings against the actual value received from the outsourced organization.

“Cost has become the dominant factor in outsourcing decisions,” one respondent says, but notes that not every provider is the same. “Clients that focus solely on cost without adequate consideration for the value that will be received are likely to pay more and not in ways that were anticipated.”