Gartner: Backlash against offshoring to vanish by 2006

IDG News Service - SINGAPORE -- The backlash against offshoring will deepen over the next few months, but it will be consigned to the wastebasket of history by the end of 2005, according to Craig Baty, an analyst at Gartner Inc.
"Global sourcing [of IT services] is an irreversible megatrend, although its true impact is yet to be felt," Baty said during the third Regional Infocomm Conference here. "By 2006, we will see a reliable global sourcing market."
The current backlash against IT offshoring in countries such as the U.S. and Australia is misguided, according to Baty. That backlash is largely driven by concerns that offshoring causes IT job loss, and "the idea that jobs will be lost through offshoring is the most emotional topic of outsourcing," he said. "But it is in fact an insignificant issue that will go away."
According to Baty, a U.S. government survey showed that IT offshoring currently accounts for less than 5% of overall U.S. job losses. The Information Technology Association of America puts the immediate job-loss figure at 2.8% because many jobs are created at the same time as other jobs are sent overseas, Baty said.
The debate over job losses is just a smoke screen to cover up less attractive reasons for opposing offshoring, according to Baty.
"Racism and xenophobia are alive and well in the West," he said. "The view is often, 'Australia's OK, it has kangaroos and they help in the war against terror; but China and India, well, we just don't know what's going on in those countries.'
"It takes just one mistake by an overseas vendor to bring this debate up all over again."
By the time the offshoring market has matured, significant consolidation will have occurred, according to Baty. "About 60% of offshore outsourcing companies will fail within three years. [adoption of new IT paradigms] always works like this."
The offshoring industry will become more professional and the proportion of outsourced IT service work that's sent offshore will triple from between 2% and 3% now to between 7% and 10% by 2010, Baty said.