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Changing Tides in IT Outsourcing

While outsourcing in the manufacturing sector sends sparks flying among politicians, IT outsourcing for services such as cloud is booming without so much as a peep from Capitol Hill. One point key to understanding this distinction is that while you outsource some work overseas (“offshoring”) a significant portion of IT outsourcing stays within the U.S., making IT a different beast altogether.

Amid the hype, however, GM announced last year that it was reversing course on its IT outsourcing trend by hiring up to 1,500 IT professionals that would bring GM's technology work back under one roof. This would reverse its current breakdown of 90 percent outsourced to 10 percent in-house IT work to 90 percent in-house and only 10 percent outsourced within three to five years.

According to The Data Center Journal's Jeff Clark, the remaining question is whether GM’s and other recent outsourcing declines are simply bumps in the road to outsourcing, or if insourcing really is the new wave.

The first indicator of a weakening in IT outsourcing came in the latter half of 2012, when, according to tech analysis company ISG, the global outsourcing market saw an 11 percent drop in the fourth quarter, and a three percent decline from 2011 to 2012.

However, these statistics do not necessarily spell the demise of outsourcing. Political and economic factors such as the U.S. debt crisis in Europe and a weakened European economy could account for this shift in numbers. ISG also lists the U.S. presidential elections and hurricane Sandy as possible contributors to the quarterly decline.

In any case, Clark says that GM's decision may reflect a fundamental issue with outsourcing that exists independently of economic conditions. Despite freeing up a company to focus on its core business, DatacenterDynamics' Ambrose McNevin points out “What many forgot was that you can only outsource once and the savings don't accrue, the costs do... [W]hat GM is telling us is that nothing is free and the price of savings is control.”

This sentiment has also led to predict an IT trend in moving higher value positions, such as capacity planning, architecture, and configuration management, back in house while reserving low-level, routine tasks for third parties.

Even if IT outsourcing on the whole has not yet made an about-face, what GM has demonstrated is that on a case-by-case basis, the balance can tip in favor of keeping IT under one company's umbrella.


Full story at The Data Center Journal

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