BPO in Information Technology
In the 1960's, EDS took over the IT functions for Frito Lay. This deal became the foundation of IT outsourcing. Today, outsourcing is becoming a crucial component of the IT services portfolio. In fact, IT outsourcing is the fastest-growing segment of the technology services market. While estimates vary, we expect that IT outsourcing will grow at least 15% annually for the next five years. Its growth is creating profitable opportunities for outsourcers, but it's also causing immense dislocation among technology companies and workers.
What's driving the demand for IT outsourcing and offshoring? Mostly, lower costs. A conservative estimate for a good Java programmer in New York City is $150,000. You can get at least five high-end Java programmers for the same cost in Bangalore, India. That means, by moving the programming overseas, productivity can be improved manifold. This is a compelling argument in an environment where IT budgets are shrinking or stagnant but digitization workload is growing. The business risk is also less as the IS outsourcing to India is a proven model.
IT infrastructure management outsourcing is also another area of tremendous growth. In general, infrastructure-outsourcing providers can offer lower prices through economies of scale, as well as reduce the number of technical employees required. We estimate that companies save between 11% and 25% when they outsource IT. Companies also outsource because they can often improve their infrastructure, getting better access to new technologies, metered services, and better architectures.
IT outsourcing has been gaining momentum, primarily because of the cost reduction benefits. Lower IT costs and capital expenditure are often cited as the main motivators for outsourcing. To get a better perspective on IT outsourcing, read the following research pieces:
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