Offshore outsourcing has generated the most angst among IT workers and a rift with management. Next year the rift will be even more pronounced as enterprises continue to look for lower cost IT services. I predict that the relentless focus on lowering costs through offshore outsourcing will come back to haunt companies in 2004.
For solving short-term issues or dealing with a specific development project or customer service application, the outsourcing route is a no-brainer, given the outsourcing partner can meet predefined goals for the relationship. But too many companies chasing cost savings will outsource functions that are better managed internally. The result will be small and big disasters -- outsourcing gone wrong. The obvious way to avoid disaster is to test, benchmark, and monitor the outsourcing partner's performance.
However, the hidden and more serious problem comes from outsourcing functions that are better managed internally. The business and technical knowledge that exists within a company is a huge, vital and often proprietary asset. Asking an outsourcing partner to replicate the knowledge in the heads of key internal staff or to guide key projects that are cross-enterprise and vital to competitive positioning can be categorised as a potential disaster.
In addition, the cost-savings promises of offshore outsourcing can be inflated. A programmer that is 25 percent the cost of a US-based one has value if the code produced isn't full of bugs and the project stays on schedule. Before you sign that next offshore or onshore outsourcing contract, be sure to read the Meta Group's Dean Davison's "Top 10 Risks of Offshore Outsourcing." The article might save you from making an ill-advised decision in the name of cost reduction.