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Back when the present economic slowdown really began in 2007/08,
many technology analysts predicted that a slowdown – or
full recession – would be a good thing for the industry.
If companies wanted to reduce outgoings they would look
increasingly to offshore outsourcing as a way to achieve this.
But it never happened, and looking back it was quite obvious
really. Any IT outsourcing programme has a lot of expense up front.
Transition cost, training cost, consulting cost, auditing cost...
there is a lot to budget for meaning that you have to commission a
large piece of work, make sure it runs to plan and only once you
get to the future business state can you hope to start making
savings.
This meant that offshore outsourcing declined during the initial
slowdown. It recovered and the market is growing again, but take a
look around Europe right now. The UK is now in recession, Spain is
about to go back into recession, the Euro currency lurches from one
crisis to the next with the continuing reality that not all
countries using the Euro now will be doing so at the end of this
year.
The Dutch Prime Minister just resigned because his people refuse
to adopt an austerity plan and the French are veering towards a new
socialist president for similar reasons.
The level of political and economic uncertainty is so great that
it would be foolish for any service supplier to still be selling
the 'reduce cost' model of business. Now if they can start
selling outsourcing based on a 'we can tell you your costs for
the next 5 years' type model then in this present climate I
expect there will be a lot more takers.
The last economic slowdown showed how unattractive the
simplistic model of slash and burn offshoring really is. If we are
heading into deeper economic uncertainty, that approach should not
make a comeback.
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