Few Companies Taking IT Offshore

60 percent of Fortune 1,000 companies not outsourcing information technology offshore, Forrester finds

60 percent of Fortune 1,000 companies not outsourcing information technology offshore, Forrester finds

Cambridge, MA — December 12, 2003 — Sixty percent of the Fortune 1,000 firms in the United States have not jumped on the offshore outsourcing bandwagon, and another 25 percent are in the experimentation phase, according to new research from technology consultancy Forrester Research.

Despite the hype surrounding the mass exodus of information technology (IT) jobs to cheaper workers overseas, only 5 percent of the Fortune 1,000 has taken full advantage of offshore outsourcing, the consultancy reports in its study "Users' Offshore Evolution and Its Governance Impact."

Forrester found that the move to offshore is not a simple short-term project for firms but a four-stage journey taking place over a 24- to 60-month period. Fortune 1,000 firms have varying levels of insight and experience with offshore suppliers, internal project management skills and perceptions of the offshore work force.

Based on these differences, Forrester classifies firms into the following four stages:

  • Bystanders — 60 percent are either doing nothing or just starting to investigate the potential of offshore. They are not spending any of their IT services budget offshore.

  • Experimenters — 25 percent to 30 percent have relationships with offshore vendors for small projects but have yet to make it a key element of their IT strategy. IT services spending on offshore falls within the 1 to 5 percent range.

  • Committeds — 5 percent to 10 percent are using offshore suppliers for more complex applications and mission-critical development services. They typically spend 10 to 30 percent of their IT services budget offshore.

  • Full exploiters — fewer than 5 percent have developed global sourcing as a core skill and documented best practices for large-scale development. Their IT services spending offshore ranges from 40 percent to 50 percent.

Additionally, the report follows the evolution of governance as it parallels the offshore commitment. Forrester notes that the offshore governance/sourcing roles and responsibilities also progress from administration to program management and development discipline as firms move through the stages.

In other findings, Forrester reports that companies with no overseas experience perceive the issues holding back offshore investment differently than do those with offshore IT or business process outsourcing (BPO) expertise.

In addition, firms in each stage of the journey have different challenges that require suppliers to address unique security concerns, program management needs and best practices, according to Forrester.

The report is available at http://www.forrester.com/ER/Research/Brief/0,1317,33325,FF.html