The maturation of offshore sourcing of information technology work

Offshore sourcing of information technology (IT) work – whether to an inhouse offshore facility or a third-party located in another country – is increasing for a variety of reasons, including lower costs as compared with domestic outsourcing and an ample supply of qualified labor. Today, U.S. firms are at varying stages of offshore maturity. In our field work, we identified four stages of maturation: Offshore Bystanders are Stage 1 companies that do not outsource offshore at all, but may have a few advocates pushing the idea. Stage 2 companies, Offshore Experimenters, are pilot testing sourcing non-core IT processes offshore. Stage 3 companies take a Proactive Cost Focus and seek broad, corporate-wide leverage of cost efficiencies through offshore work. Stage 4 companies take a Proactive Strategic Focus and view offshore sourcing as a strategic imperative. This paper describes these four stages and the managerial tactics associated with each one. It also examines the dynamics of the global IT labor market, and recommends how to move up the maturity curve.