Domestic Outsourcers Now Favored By Most Tech CFOs - InformationWeek

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IT Leadership // IT Strategy
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3/9/2009
12:48 PM
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Domestic Outsourcers Now Favored By Most Tech CFOs

Vendors are repatriating some operations in the face of heightened economic and geopolitical risk.

The majority of American tech industry CFOs plan to use U.S.-based companies for outsourcing this year, according to survey results released last week.

BDO Seidman, an accounting and consulting firm, found that 62% of CFOs at leading American technology companies outsource services or manufacturing.

Twenty-two percent said that they plan to outsource through American companies this year, compared with 16% who plan to outsource to China and 14% who plan to outsource to India. Nineteen percent said they have no interest in additional outsourcing, according to the BDO Seidman 2009 Technology Outlook Survey, which looked at opinions from 100 CFOs in January.

Forty-two percent of CFOs said their international operations are based outside the United States, down from 79% last year. Nearly a third said their biggest concern about international growth is an uncertain business or political climate. Twenty-one percent cited currency risk, while 14% cited potential for the exploitation of intellectual property, and 10% said training international employees presented the biggest concern.

"While last year may have produced an outsourcing bubble, 2009 will see companies retrench to survive in the face of reduced demand," Douglas Sirotta, a partner in BDO Seidman's Technology Practice, said in a statement Wednesday.

"The United States has become a far more viable option for them. This year we are seeing three global factors that are causing U.S. technology companies to pull back from traditional outsourcing locations, led by the recent boom and bust of the worldwide economy. Satyam's fraud case and the terrorist attacks in Mumbai are causing a lot of companies to reconsider operating in India. And supply chain and shipping cost issues in China are negatively impacting the attractiveness of outsourcing technology operations to the Far East," said Sirotta.

India is the most popular foreign destination for U.S. outsourcing, accounting for 50% of the share. Southeast Asia ranks second, with 31%, and China ranks third, with 19%, according to the survey.

The survey found that manufacturing is the most common function to be offshored, followed by IT services and programming, research and development, distribution, and call centers.


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