Special issue on global sourcing of business and IT services

Abstract

I ncreasing globalization and technological developments have contributed to the growth of the outsourcing and offshoring trends worldwide. These trends started in the late 1980s–early 1990s as Information Technology Outsourcing (ITO). This has been expanding to include Business Processes and Services (BPO), and today also covers a wide range of knowledge-intensive and strategic processes and services. The global IT outsourcing ITO market has increased each year since 1989, when global ITO was only a US$9–$12 billion market. On conservative estimates, looking across a range of reports and studies, global IT outsourcing revenues will probably exceed $290 billion in 2012. With business process outsourcing revenues exceeding $175 billion in the same year, and offshore outsourcing representing more than $85 billion of these combined revenue figures, it is very clear that, with its 20 year plus history, outsourcing of IT and business services is moving into becoming an almost routine part of management, representing for many major corporations and government agencies the greater percentage of their back office expenditures. Moreover, all projections we have looked at or made suggest continued growth over the next 5 years (2012–2016). Our own synthesis of the reports from Everest, Gartner, NASSCOM and IDC suggests that ITO global growth will be in the range of 5–8% per annum, with business process outsourcing rising by 8–12% per annum, and, subsumed within these, offshore outsourcing growing at an even faster annual rate. Client organizations continue to have a strong appetite for contracting with domestic, offshore and global BPO providers, and offshoring remains strong despite some reshoring pressures in developed countries. The year 2011 saw slowing of BPO growth in many markets with a pick up later into 2012. Some, but by no means all, are now experiencing growth rates above 12% per annum. In practice, offshoring and outsourcing often retain their scale through recessionary as well as growth periods, making them attractive businesses for growing economies. A highly competitive global services market presents opportunities and revenues for countries able to offer the right mix of strong cost, reliable service and secure location. The growth of outsourcing and offshoring affects all industries and organizations, and has also attracted the attention of governments and politicians who are frequently found arguing in favour, or against, these phenomena. In Western Europe and North America, opinions are divided between seeing outsourcing as a potential danger, for example, people losing their jobs that are moved offshore, and as potential benefits – lower costs, accessing skills in short supply, supporting increased scale of expanding businesses. In the developing economies – and we have identified over 120 offshore locations for IT and business services – outsourcing and offshoring are usually perceived positively as bringing new business, foreign investment, and facilitating job creation and economic growth in these countries.