Large companies are accelerating their use of offshore outsourcing, and as many as a quarter of IT jobs at Global 1,000 firms may be moved offshore by 2010, according to The Hackett Group, a Miami-based consulting firm whose clients include many multinational corporations.
According to the firm's research, those large companies -- which have revenues of at least $5 billion -- will move about 350,000 corporate jobs offshore over the next two years. More than half of those jobs will be in IT, with the remainder in finance, human resources and procurement
The data "is a confirmation of a mega-trend" similar to what happened in the manufacturing sector several decades ago, said Michel Janssen, Hackett's chief research officer. And while 25% of the IT jobs may head overseas in the next two years, over the longer term that figure could hit 60%. In some organizations, it could reach 80%.
Earlier this year, a study based on data collected from 10,000 people estimated that as many 8% of all IT workers have been affected by offshore outsourcing. That study was conducted by researchers at New York University's Stern School of Business and the University of Pennsylvania's Wharton School.
The Hackett Group conducted its survey in October, collecting data from 200 companies worldwide. Of those organizations, 40% have headquarters in the U.S. and a similar percentage are based in Europe. The IT head count at each of the companies is about 1,600.
This big shift in jobs to low-cost offshore locations may be accelerating, in part, because companies are more experienced -- and comfortable -- with offshoring and have developed standardized practices, according to Erik Dorr, Hackett's senior IT research director.
Dorr said he is uncertain how the economic conditions in October influenced responses. "What is clear, though is that they are certainly not slowing [offshoring] as a result of economic crisis," he said. "If anything, they are going to be more aggressive."
The typical company is currently realizing about $16 million in annual savings from offshoring, with more than half of that in IT cost savings. That savings will grow to $30 million by 2010 as offshoring increases -- a figure that still only represents one-third of what these enterprises could eventually save.
Despite the growth in offshoring, the overall economy has seen a net gain of IT jobs in recent years. Whether that trend will hold, given the current downturn, is unclear, said Dorr.
The study did find that in their finance and IT departments, about 50% of all companies surveyed are freezing hiring, cutting staff or doing both.
In today's world, companies have to use global delivery models if they want to grow and create new jobs, according to Janssen.
"If you are sourcing all of your labor from high-cost countries," he said, "you are not going to be in business -- period."