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Outsourcing: The 'O' Word Reconsidered

Outsourcing is finally being seen as just another tool in the CIO's toolbox

By Mary Brandel
May 16, 2005 12:00 PM ET

Computerworld - Seven hundred ninety-one. That's the number of companies that, according to CNN commentator Lou Dobbs' Web page, are either "sending American jobs overseas or choosing to employ cheap overseas labor." Since 2003, Dobbs has kept a running tally of companies that, in his view, are "exporting America." In that same time frame, it has become increasingly difficult to find a CIO who doesn't clam up at the mention of outsourcing or offshoring for fear of becoming yet another name on that list.
Today, with the presidential election a distant memory and the press frenzy subsiding, the subject has cooled off a degree or two. While outsourcing is still controversial, we've reached the point where most IT executives -- whether they believe it's a good thing, a necessary evil or an act of treason -- agree on this: It's time to take a realistic look at outsourcing.
CIOs say it's only by talking openly about outsourcing and offshoring plans that they can help allay uncertainty about the topic. Moreover, they reason that it's far better to concentrate on what they can control, not on what they fear. And what they can control is the value they provide.

Jerry Bartlett of Ameritrade
Jerry Bartlett of Ameritrade
"This may be the year it becomes less of a dirty word," says Jerry Bartlett, the Columbia, Md.-based vice president of application development and quality assurance at Ameritrade Holding Corp. "Cooler heads are beginning to prevail, and IT leaders are recognizing they need to move beyond the rhetoric and step up to their leadership roles."
"The shock has passed, and people are beginning to say, 'This is reality,'" agrees Michael Corbett, president of Michael F. Corbett & Associates Ltd., an outsourcing consulting firm in Lagrangeville, N.Y. "They've realized that companies are going to make certain decisions along these lines, and they're starting to think about how to position themselves."
Moreover, managers have had enough experience with offshoring to understand that it's not likely to send their companies over the rainbow. "The idea that you're going to save 70% to 80% in development costs is a myth," says John Wade, CIO at Saint Luke's Health System in Kansas City, Mo. "You have to help guide [offshore providers] through the process, and with the additional overhead, savings are more like 20% to 30%."
Just Another Option
Whatever view you take of outsourcing, it's pretty clear that the entire spectrum of sourcing - outsourcing, in-sourcing, offshoring, near-shoring and rural sourcing -- has gained a place as a bona fide tool in the CIO's tool belt. "Outsourcing was previously viewed as an

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