Interest in Overseas Outsourcing Remains Low

Government CIOs have shown little interest in offshore outsourcing. Political and union pressure has made the option of shifting IT work to less costly locations overseas highly unpopular and unattractive. Now it turns out that CIOs in general don't much care for the practice either.

When asked whether their company currently outsources IT jobs outside the U.S., 94 percent of CIOs said no, according to a recent survey of 1,400 CIOs by Robert Half Technology. And the situation isn't going to change soon. Over the next two years, 86 percent of CIOs said they wouldn't change their lack of interest in offshore outsourcing.

"Challenges such as language, culture and time-zone barriers can sometimes outweigh the potential benefits of outsourcing," said Katherine Spencer Lee, executive director of Robert Half Technology. "Smaller companies, in particular, may lack the resources to commit to an effective long-term offshoring strategy."

Large firms are likeliest to outsource overseas, according to the report. In companies with more than 500 employees, 11 percent of CIOs reported outsourcing, compared to 5 percent overall and 3 percent for firms with fewer than 250 workers. The survey indicated that most of the growth in offshoring will come from firms that already outsource overseas, not from firms new to the practice.

Offshore Hurdles

Firms that had stopped outsourcing overseas indicated three major problems areas with the practice:

• Required too much oversight/management         59 percent
• Cost savings were not realized                          30 percent
• Quality of work not good enough                       23 percent

For government CIOs willing to contemplate possible outsourcing overseas, Lee suggests they consider the following strategies:

• Look for stability. Choose a vendor that has a track record of measuring staff turnover and retaining employees.
• Setup time and costs. New jobs or even departments may need to be created to handle vendor selection, manage contracts, train workers and oversee remote work teams.
• Management challenges. Dispersed IT work teams may require a different level and type of oversight from management.
• Security and privacy concerns. Intellectual property risks such as the enforcement of patents, copyrights and trade secrets may require additional oversight and resources.

More likely, CIOs working for public-sector organizations will outsource indirectly through their private-sector partners or systems integrators. Few government IT departments have the capability, let alone the political will power, to outsource overseas directly. But like so many aspects of the global economy, change occurs fast. What seems like a remote possibility today could be second nature a few years down the road.