Recent Surveys (reported in IEEE Computer, May 2009) suggest that US firms are changing their global perspective on IT outsourcing albeit slowly. It seems that prices, tax regimes and new evidence of instability are putting companies off of more outsourcing to India at least for now. They are taking an ambivalent view of China - negative for similar reasons to India and positive because China is at least a reasonably mature alternative to India.
Two interesting points in the report: New outsourcing initiatives are less likely this year because of the start-up cost; and Idaho and Indiana are represented on the list of emerging outsourcing locations. Hmmm!
IT spend as % of revenue is a frustrating metric because it places IT firmly in the sphere of costs that cannot be avoided and must be managed rather than an investment that should yield beneficial value. Being above or below the average % revenue line is no great indicator of success other than the feeling that, as a CIO, you are doing are doing better or worse than your peers in the eyes of your boss (especially if your boss is the CFO). Looking at the chart below (if you click on it you will get a version that’s easier to read), you can see that, for the mash of all industries, the percentage has stayed remarkably stable between 3% and 4% over the past eight years. What does this tell us? Two things:
1. I think its a number that business and IT need to be aware of (about 3.5% - more on the industry specific numbers soon)
2. Because this variable has been held steady, we can look at the other variables in a different light. For example, have all the contributions to better performance over the past eight years (SOA, web services, ITIL, CMMI) been a waste of time or are the improvements perfectly cancelled out by the cost of the extra work we are able to do now? What do you think?
The above chart was created from data provided in the InformationWeek 500 published on September 15, 2008. (reprints of that article which includes the data but not the chart are available at www.magprints.com/informationweek500
