More Companies Likely to Reverse IT Outsourcing

More Companies Likely to Reverse IT Outsourcing

GENERAL MOTORS’ decision to bring most of its information technology activities back in-house may not be an insourcing trend yet, but it’s the beginning of one, say observers.

The company piqued market interest with the announcement earlier this month that it would end 90 per cent of its IT outsourcing to reduce costs, increase efficiencies and foster greater innovation in software development.

It is seeking 2000 developers, project managers, database administrators and business analysts to work in four new data centres in the US and may add up to 10,000 IT staff globally within five years.

Global spending on IT outsourcing is set to hit $US251 billion ($A240 billion) this year, up 2.1 per cent from the previous year and rapid growth in cloud computing is expected to keep the sector firing in the medium term.

Conversely, a “single digit percentage” of companies were bringing some or all of their outsourced operations back in-house each year, Gartner analyst Rolf Jester said. “One major company doesn’t make a trend,” he said.

In May, Westpac said all app development would be done in-house and its offspring, St George, reversed a decision to outsource about 200 IT jobs.

“Spending worldwide on outsourcing is going up year on year and will continue to go up. This does not mean some individual companies won’t make decisions in different directions,” Mr Jester said.

The insourcing strategy, orchestrated by recently appointed global chief information officer Randy Mott, signals a big departure from a 40-year-old outsourcing policy.

GM owned the world’s largest IT outsourcing business, Electronic Data Systems, from 1984 to 1996, when it was spun off as an independent company. EDS was acquired by Hewlett Packard in 2008.

While more companies contract more of their IT functions out to third parties, the car maker’s move was a sign the outsourcing market had matured to the point CIOs had sufficient confidence to evaluate their individual circumstances and buck the trend, Mr Jester said.

Asia Pacific director for IT consultancy SMS Management and Technology, David Moodie, said large companies were becoming aware that long-term outsourcing could stifle innovation. “[Or they're realising] that they’ve lost control of driving their agenda,” he said.

CATEGORY: Global News

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