US manufacturing giant Procter & Gamble is reportedly considering moving outsourced work in-house in a bid to retain control of IT that can affect its competitiveness.
According to a report, the manufacturer is looking closely at contracts, including a multi-billion dollar agreement it signed with EDS in 2003. EDS is now owned by HP following an $8bn acquisition in 2008.
Last year, General Motors (GM) announced plans to bring its outsourced IT, which was about 90% of the total, back in-house and recruit 10,000 IT workers in the process. With pressure on large multi-nationals in the US to repatriate jobs, GM might not be the last.
According to an article in the Times of India, sources familiar with Procter & Gamble’s plans said the reason for the rethink is to have “direct control over crucial portions of the technology piece with implications for its competitive positioning”.
In a blog written for Computer Weekly, Ilan Oshri, a professor at the Loughborough School of Business, said the benefits of the trend of bringing outsourced work back in-house – known as backsourcing – are not fully understood.
More on backsourcing
Oshri said in his post: "The list is long, just to name a few: American Airlines brought back its IT infrastructure from IBM in 2007. JPMorgan Chase terminated a $5bn contract with IBM in 2002 and Mutual of New York ended a seven-year contract with CSC in 1997. Sainsbury's terminated an outsourcing contract with Accenture after five years of service. McDermott International Inc. dropped what was supposed to be a 10-year global IT outsourcing deal with AT&T's professional services and took back responsibility for design, implementation and management of its IT services. More recently both Santander and General Motors announced that they are bringing back offshored work from India to onshore.
"While there are high-profile client firms and vendors involved in backsourcing, there is still very little known about the phenomenon. In many of the cases, it is simply because client firms avoid publicising backsourcing in order to not upset their outsourcing vendors. While we know a little about the reasons to backsource, I can safely say that we know nothing about the success criteria."