As US businesses continue to stretch their
capital-expenditure budgets, the pace at which they use offshore
service providers is picking up, according to a report by Forrester
Research.
Forrester predicted that the number of US services jobs moving
offshore by the end of 2005 will be 830,000, a 40% rise on its
original forecast of 588,000 published 18 months ago. The types of
services included in this number include both IT and non-IT
jobs.
"User interest in offshore services continues to rise,
particularly on the IT side," said Karyl Levinson, director of
Forrester corporate communications.
"Companies are looking to stretch their flat or declining IT
budgets and looking at offshore as a way of doing more with less,
or the same amount."
The types of IT jobs that go offshore are directly related to
computer technology, such as applications coding and management, to
those that depend heavily on IT, such as call centre, loan
processing, back-office accounting and other business process
outsourcing (BPO) jobs.
In the "computer" category, 181,000 jobs will be moved offshore
by the end of 2005, compared with 102,000 in 2003. This number will
rise to 542,000 by 2015, said the report.
Life sciences jobs being moved offshore will rise from 300 in
2003, to 4,000 in 2005 and 39,000 in 2015. In the "office"
category, 146,000 jobs were moved offshore in 2003, a number
expected to climb to 410,000 in 2005 and 1.6 million in 2015.
However, not all IT-related jobs are in the computer category,
noted Forrester vice-president John McCarthy.
Jobs in art and design and architecture included IT-related
research and development. Many tasks in the "office" category are
related to BPO, he added.
Despite the updated forecast, there has been a spate of press
reports about outsourcing deals gone bad, and articles about
companies pulling back from offshore outsourcing, or
"offshoring".
"The articles on pullbacks have really been overstated," said
Forrester vice-president Stephanie Moore.
"There have been problems but really these have been glitches or
hiccups," she said, adding that "problems are more related to
internal lack of preparation. Some companies are not preparing
themselves internally to manage the complex relationship with
offshore suppliers".
Adding fuel to the offshore services fire is the fact that
offshore suppliers and US-based services providers have added to
non-US facilities and services offerings.
Leading Indian suppliers such as Satyam Computer Services, Wipro
and Infosys Technologies, have grown in terms of revenue and
employees during the past year and a half, which allows them to add
to their portfolio of offerings.
Meanwhile, US suppliers such as IBM, PeopleSoft and
Accenturehave added to non-US operations not only in India, but in
China and the Philippines, over the past 18 months.
The other major factor in the growth of offshore services is
that offshoring has become a requirement of BPO.
"BPO growth will inevitably propel the number [of jobs moving
offshore] in terms of offshore growth," said Forrester
vice-president Bill Martorelli. "Offshore is booming and in the
context of BPO [it is] highly inseparable."
The Forrester report forecast that the total number of services
jobs moving offshore in 2015 is now 3.4 million, compared with 3.3
million made 18 months ago.
Forrester's methodology for its forecast was based on: trips to
India by analysts; offshore "best practices" interviews with more
than 100 companies; a baseline number update from the 2002 US
Bureau of Labor Statistics; 300 supplier briefings and research
with third-party sources.
Marc Ferranti writes for IDG News Service