What's the No. 1 Enemy of Outsourcing? Not Recession.

As the economy worsens, the prospects for outsourcing and offshoring improve. Throughout 2008, the key word for the economy was "uncertainty." While facing uncertainty, CIOs avoided significant changes to internal organizations or operations, including evaluating or implementing outsourcing. Most outsourcing initiatives are driven by a strong need for change and "economic uncertainty" hindered that need.

Now that the economy is officially in a recession and the 2009 outlook is dire, two changes are taking place. First, CIOs are making cuts to projects and programs, including those staffed by outsourcing firms. Second, beginning in 2009, IT organizations will pursue outsourcing as a method to reduce costs.

Cost Cutting

As CIOs mandate immediate program cuts, some will inevitably impact existing outsourcing agreements. The software development services market, including globalization, will feel the majority of the impact as discretionary projects are cut. At the same time, customers with infrastructure contracts indicate that they are already increasing pressure on existing providers. For companies that have outsourced a majority of their infrastructure, the outsourcing provider is one of the few place to look for potential cost reductions. Financial analysts will continue the "doomsday" forecast for outsourcing providers as they see reductions to current contracts as a foreboding omen to industry growth.

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