Companies that previously outsourced IT projects and support to offshore providers are now rolling back their operations, according to reports in the Wall Street Journal. Labeled ‘insourcing’, businesses are now returning IT assistance from foreign third-party companies, as the trend for handling projects closer to home continues to take hold. With the rise in insourcing, IT staffing firms are seeing a surge in new business.
A study by Deloitte found that 48% of respondents had canceled outsourced IT contracts early, with the main reasons being breach of contract or service levels and convenience. Unreliability and poor service have plagued the industry, and the difficulty of the IT sector in particular has proven to be less suited to outsourcing. Companies are often choosing to insource, and then work with Western IT firms for staffing and complex projects.
The study found that one of the main factors in the reversal of trends lay in the need for businesses to have more direct, close control over the IT infrastructure they manage. Of the 48%, some 34% have said they made the switch to running formerly outsourced projects in-house, primarily to ensure better control and oversight of the tasks they are completing.
Outsourcing grew as a concept in the early 2000s, with businesses finding it feasible for the first time to work with foreign partners for IT and back-end support. Improving online technologies allowed for direct access to a global labor pool, which enabled businesses to save on the costs of staffing.
However, with some companies now pulling away from outsourcing across IT and a number of other business areas, it looks like the decade-long outsourcing fascination could be beginning to stabilize.
While the costs of outsourcing are often cheaper, particularly as far as offshore providers are concerned, the complexity and intricacy of some work means that businesses are choosing a more supervised approach.
A Deloitte spokesperson said that the economic benefits of outsourcing have to make sense for businesses in order for the practice to continue at current levels.
“If economic gains are less than expected, an organization may choose to bring some or all of the previously outsourced work back in-house. It is important to note that the first step of determining whether your outsourcing arrangement should be insourced or re-tendered is a thorough business case that takes into account the full set of costs associated with the change.”
Outsourcing is the process of contracting out work to third-party vendors. Organizations that outsource back-office tasks can save on the costs of staffing, while benefiting from the expertise of highly qualified providers elsewhere. The ability to scale up and down with outsourcing teams allows better flexibility for those that choose this route.
The downside comes through a lack of control, and managing outsourced projects is a task in its own right. With more organizations now pulling away from outsourcing as a strategy, companies are now looking to find alternative ways of increasing their in-house resources.
IT Staffing experts at mentel, for example, can work within the existing infrastructure of an organization to allow greater oversight and control, while still delivering the same benefits of outsourcing. As more organizations favor control and effectiveness over the cost-savings of offshore vendors, the trend looks set to become firmer in the years to come.