I.T. Outsourcing: Expect the Unexpected

Outsourcing may be commonplace, but it continues to confound IT executives' expectations. Take the common myth that companies outsource to save money. Not only is this not true in half the cases, but our survey shows that most companies aren't saving money by outsourcing.

And that's not the only surprise: Insourcing and outsourcing, though polar opposites, are both on the rise. Companies spend more on offshore vendors than domestic ones, despite problems with quality and delivering return on investment. Dissatisfaction with outsourcing vendors is widespread, yet most of the 401 IT executives who took our survey blame their own companies most of all for the disappointing performance of their vendors. Though outsourcing is directly responsible for layoffs, it's not as disruptive as it was last year.

Should our findings cause concern? After all, no more than 29 percent say they are dissatisfied with any of the 11 outsourcing activities we tracked. Still, our research suggests that outsourcing is providing less value than it should due to mediocre management by outsourcing customers and poor performance by vendors. That explains why satisfaction with outsourcing is lukewarm and not enthusiastic. But there's a silver lining: If outsourcing isn't saving money, it also could mean CIOs are efficiently running their IT organizations.

Gartner predicts: Nearly Half of IT Jobs will be Lost to Automation by 2015

By 2015, 40% of today's IT job roles will be lost to automation, predicts Gartner. Although the number of people employed in the US manufacturing sector has declined steadily during the past 50 years, productivity per worker continues to rise and has doubled in the past 20 years.

'The same trend will be true of IT-related jobs as we move further into the information age. Multiple, simultaneous trends are converging in IT departments' say the analysts.

* At lower levels of the IT stack, real-time infrastructure is transforming the deployment, configuration and virtualization of network, server and storage resources.
* At the application level, the move to more-granular-based data and logic architectures and libraries of reusable components will reduce time for new application development by 90%.
* At the business process level, process owners armed with business process management orchestration tools will change process and information flows using graphically based tools with little or no involvement of the traditional IT department.
* The evolution of real-time infrastructure to encompass all of IT architecture will enable IT to become an enabler of change for the business.

The move to real-time and process-focused IT infrastructure will automate and obsolete many of today's IT roles. As a result, and despite the current hype, more IT jobs will be lost to automation than to outsourcing during the next 10 years.

Between 2005 and 2010, the productivity of the remaining IT workers will rise by at least a factor of 10. This will not be a US-only phenomenon. Countries that provide IT outsourcing will also adopt these automation technologies, displacing large numbers of their own workers.

A significant shift will occur to embrace process-focused mind-sets toward managing the business. There will be an explosion of interest in business process management suites and their integration with underlying software infrastructure.

A new business discipline will emerge. "Business systems engineering" will holistically link business strategy change to infrastructure change in a framework of strategic change management. And new IT jobs will emerge, but will not offset those lost to automation. New areas of IT skills will be needed around data and logic architectures, business process management and modeling, information flow, and relationship management.

Gartner concludes that, because of its more-fluid labour laws and culture, the United States will be better positioned competitively to use business change as a strategic weapon as compared to Western Europe, China and Japan at least as far into the future as 2015.