Offshoring has become a standard tool for most corporate I.T.departments and many ERP vendors over the last ten years. Suppliers of offshoring services often present themselves in grandiloquent terms as “long term partners” etc. This is, of course, just marketing fluff. Buyers of these services have no such illusions and realize that it’s quite simply labour cost arbitrage.
This has sparked a huge boom among suppliers, often on the Indian sub-continent, offering offshore facilities. The boom is about to end.
In many I.T. departments there is a massive and on-going decline in bespoke application development. This has already led to a decline in the demand for developers and far fewer will be needed in the future. In addition, Web technology will make call centre style support increasingly redundant. Hardware virtualisation is already reducing the number of corporate data centres and staff needed to operate them.
In summary, I.T. is becoming significantly less labour intensive. Labour costs are a rapidly shrinking percentage of the total budget. The incentive to reduce them is declining and with it the need to consider offshoring solutions. Offshoring is looking like a better solution to yesterday’s problems but increasingly irrelevant in a less labour intensive environment.
No doubt all of this will prompt yet another one of corporate I.T.’s periodic existential crises.
On the other hand what is cloud but a next generation of outsourcing. That is clearly not irrelevant.
Charlie,
Outsourcing and offshoring are orthogonal. My post was about offshoring.
I agree with you about cloud computing being a form of outsourcing and I expect it to grow dramatically. It’s the offshoring boom that’s finished.