Outsourcing pummels offshoring in IT budget plans

Far more IT managers are dedicating budget dollars to outsourcing than offshore services, according to a recent survey conducted by the Society for Information Management, which also revealed IT managers are spending less on average with offshore providers.

SIM, an industry organization that tracks trends in IT, recently surveyed about 130 CIOs and IT executives from 112  companies to determine the top priorities for 2007. The results show that about 80% of companies plan to dedicate as much as 5% or more of their IT spending to outsourcing, while more than 70% of companies have allocated none of their budgets dollars toward offshore services.

Specifically, close to 40% of survey respondents plan to allocate 5% or less of their overall IT budget to outsourcing. A little more than 20% said they will dedicate 10% or less of their IT dollars, and more than 10% reported they intend to spend up to 20% of their IT budgets on outsourcing. About 6% plan to spend 30% or less on outsourcing, and 1% each said they'd spend up to 40%, 50% and 75%. More than 2% reported they would put more than 75% of their IT budget toward outsourcing.

On the flip side, the survey found that far fewer CIOs and IT executives polled plan to dedicate the same dollars to offshore services. More than 70% reported they would spend none of their IT budget on offshore services. About 20% planned to spend less than 5% on services outside of the United States. About 5% said they would spend as much as 10%, and just 1% intend to spend as much as another 20%. Another 1% said they would be spending more than 75% of their IT budget on offshore services.

And SIM found that on average IT executives are dedicating a smaller percentage of their budget in 2007 when compared with 2006. The industry organization reported that in 2006 companies were allocating about 4.23% of their IT budget to offshore services, but in 2007 that number dropped to just 1.10%.

SIM experts say the trend toward outsourcing over offshoring bodes well for IT workers in the United States. When considering that more than 50% of companies intend to increase headcount in 2008 and close to 80% plan to outsource at least some of their IT services within the United States, SIM's vice president of academic affairs Jerry Luftman says the outlook for IT careers can only be seen as positive.

"The types of skills people are looking for and the plans to outsource bode well for the state of our industry," he says.

The SIM report also highlighted how many of those surveyed ranked issues with hiring and retaining talent a top concern.