As US businesses continue to stretch their capital-expenditure budgets, the pace at which they use offshore service providers is picking up, according to a report by Forrester Research.
Author John McCarthy predicts that the number of US services jobs moving offshore by the end of 2005 will be 830,000 - a 40 percent jump over its original forecast of 588,000 published 18 months ago. The types of services included in this number involve both IT and non-IT jobs, according to the new report.
"User interest in offshore services continues to rise particularly on the IT side," said Karyl Levinson, director of Forrester corporate communications. "Companies are looking to stretch their flat or declining IT budgets and are looking at offshore as a way of doing more with less, or the same amount."
In terms of IT, the types of jobs that will be done offshore run the gamut from tasks directly related to computer technology, such as applications coding and management, to those that depend heavily on IT, such as call-centre, loan processing, back-office accounting and other business process outsourcing jobs.
In the "computer" category 181,000 jobs, cumulatively, will be moved offshore by the end of 2005, compared to 102,000 in 2003. This number will rise to 542,000 by 2015. Life sciences jobs being moved offshore will rise from 300 in 2003, to 4,000 in 2005 and 39,000 in 2015. In the "office" category, 146,000 jobs were moved offshore in 2003, a number expected to climb to 410,000 in 2005 and 1.6 million in 2015.
Not all IT-related jobs are in the computer category, noted McCarthy. Jobs in art and design and architecture include IT-related research and development, he said. He also noted that many tasks in the "office" category are related to outsourcing. Forrester did not provide a specific figure for all IT-related jobs.
Despite the updated forecast, there has been a spate of press reports about outsourcing deals gone bad, and articles about companies pulling back from offshore outsourcing, or "offshoring", noted Forrester VP Stephanie Moore.
"The articles on pullbacks have really been overstated," she said. "To be sure, there have been problems but these have been really glitches or hiccups," adding that "problems are more related to internal lack of preparation. Some companies are not preparing themselves internally to manage the complex relationship with offshore vendors."
Forrester's methodology for its forecast was based on trips to India by analysts; offshore "best practices" interviews with more than 100 companies; a baseline number update from the 2002 US.Bureau of Labor Statistics; 300 vendor briefings; and research with third-party sources.