Gartner: Backlash against offshoring to vanish by 2006

David Legard (IDG News Service)
15 June, 2004 11:20
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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 Craig Baty, group vice president, Global Tech Industries Group, Gartner.

"Global sourcing (of IT services) is an irreversible megatrend although its true impact is yet to be felt," he said during the 3rd Regional Infocomm Conference in Singapore. "By 2006, we will see a reliable global sourcing market."

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

"The idea that jobs will be lost through offshoring is the most emotional topic of outsourcing," he said. "But it is in fact an insignificant issue that will go away."

According to Baty, a U.S. government survey showed that IT offshoring currently accounts for less than 5 percent of overall U.S. job losses. The Information Technology Association of America (ITAA) puts the immediate job loss figure at 2.8 percent at the same time as many other jobs are created, Baty 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 percent 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 percent and 3 percent now to between 7 percent and 10 percent by 2010, Baty said.