IT outsourcing in the US to increase

IT outsourcing in the US to increase at 5.9 %. The American IT outsourcing market is expected to increase at a compound an annual growth rate of 5.9 per cent, from $13.3 billion in 2006 to $17.7 billion by 2011, a new report has summarized.

There will be continued shift within federal market away from a government-owned, government-operated model towards a contract-operated approach, the report said. This shift, it says, is fueled by the impending federal IT workforce shortage, war in Iraq, and federal contract spending slowdown.

The report has been prepared by INPUT which helps companies develop federal, state, and local government business and counts 1,300 members, including small specialized companies, new entrants to the public sector and the largest government contractors and agencies.

The most important factor leading towards a greater reliance on outsourcing in the future is the fact that a significant portion of the federal technology-related workforce is entering retirement age.

To obtain the IT talent required and to minimize the costs of acquiring new technologies in relatively short time frames, spending in the areas of business process outsourcing and application services will contribute the greatest growth to the federal outsourcing market over the forecast period, the report said.

The level of federal IT skill in the out years is not very promising to meet the federal IT demands of the future. As baby boomers choose retirement, federal agencies will outsource more and more mission-critical functions if the talent needed to perform these tasks can be done more efficiently by contract personnel.

By the end of the forecasting period, agencies will have switched to a wholesale preference for smaller outsourcing contracts or multi-sourcing contract arrangements. This could be viewed as a total about-face when considering the recent trend in favor of the outsourcing mega-deal.

The general sentiment in the tech community is that Indo-US business momentum, irrespective of the Americans’ political preferences, will continue.

The outsourcing industry is seen to have evolved and grown since the presidential elections in 2004. Outsourcing today is a sector of higher visibility and acceptance. The emergence of the global delivery model has taken away the focus from an India-only offshore model to a multi-geography model that has further enhanced the acceptance of outsourcing.

What happened to the resistance against moving jobs in manufacturing and textiles to China, Taiwan and Hong Kong is seen to be happening now in IT/BPO. ‘That resistance died out with all stakeholders realizing the cost benefits.

Resistance will be there only till a mutual economic feasibility point is met. After that, it’s a matter of sustaining that relationship. That’s what is happening between India and America now.

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