Gartner: Offshoring backlash to vanish by 2006

Gartner: Offshoring backlash to vanish by 2006

The backlash against offshoring will deepen over the next few months, but will be consigned to the wastebasket of history by the end of 2005, according to the vice-president of Gartner’s global tech industries group, Craig Baty.

“Global sourcing [of IT services] is an irreversible mega-trend although its true impact is yet to be felt,” he said during the third Regional Infocomm Conference. “By 2006, we will see a reliable global sourcing market.”

The current backlash against IT offshoring in countries such as the US and Australia — based on the notion that offshoring causes IT job loss — is misguided, according to Baty.

“The idea that jobs will be lost is the most emotional topic of outsourcing,” he said. “But it is an insignificant issue that will go away.”

According to Baty, a US government survey showed that IT offshoring currently accounts for less than 5 per cent of overall US job losses.

The Information Technology Association of America (ITAA) put the immediate job loss figure at 2.8 per cent at the same time as many other jobs were created, he said.

The job loss debate is just a smokescreen to cover up less attractive reasons for opposing offshoring, according to Baty.

“Racism and xenophobia are alive and well in the West,” he said. “The view is often ‘Australia’s okay, it has kangaroos and they help in the war against terror, but China and India, well, we just don’t know what’s going on in those countries’.

“It takes just one mistake by an overseas vendor to bring this debate up all over again.”

By the time the offshoring market has matured, significant consolidation will have occurred, according to Baty.

“About 60 per cent of offshore outsourcing companies will fail within three years,” he said. “It [adoption of new IT paradigms] always works like this.”

The offshoring industry will become more professional and the proportion of outsourced IT service work sent offshore will triple from between 2 per cent and 3 per cent now to between 7 per cent and 10 per cent by 2010, Baty said.

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