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The future of IT outsourcing

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IT outsourcing will change dramatically in the next 10 years, Gartner analyst Rolf Jester predicts. He says that in this time new alternatives will be offered to buyers and suppliers will be met with additional outsourcing challenges."

Jester's predictions come from a four-scenario framework designed by Gartner to predict the future of IT outsourcing. The researcher says the impact of offshore outsourcing is currently minor, and predicts that an estimated seven percent of AU$958 billion of global outsourcing contracts being spent offshore by 2007.

Jester says offshore outsourcing is only one of a myriad of changes the IT sector will undergo through to 2013.

"We have identified more than 100 changing facets of outsourcing that will determine its direction over the next decade," Jester says. "But two overriding factors will influence IT in an enterprise."

These two factors are the adoption of real-time enterprise strategies (a commitment by an organisation to use information to adapt quickly to the constantly changing business environment) and the types of service that enterprises will outsource from now until 2013 (be it whole business processes or just the underlying IT functions).

Jester says two factors will determine one of four future scenarios for an IT department. These are:

• IT inertia -- a scenario in which the existing IT investments serve to slow down the ability of the business to change quickly enough;
  
  
• Process islands -- a sub-optimal state in which departments inside an enterprise look after their own business process needs, diminishing the relevance of the CIO and IT staff;
  
  
• IT-centric real-time enterprises -- in which businesses have become agile through a strong focus on IT;
  
  
• Virtual enterprise -- organisations are real-time by nature, stick to their core business and buy external services for all of their non-core activities.

"While nothing can be certain looking a decade ahead, one of these scenarios is likely to be dominant for all organisations in 2013," Jester says.

"Outsourcing is undergoing significant change right now. Offshoring and near-shore sourcing is just one of many changes that private enterprise and government agencies must come to terms with. It would be smart for IT executives to begin thinking about which scenario they would like to create for their organisation, and compare it to the one that is evolving right now."

And while businesses will choose one of these models, the world itself is predicted to move to virtual or IT-centric model.

This article was first published in Technology & Business magazine.
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