Outsourcing Declines, Are IT Jobs Coming Back?

IT leaders and CIOs are reexamining their outsourcing mix and bringing some—but not all—IT back in-house

By Stephanie Overby
Tue, May 01, 2012

CIO — The history of corporate IT has always been marked by extremes. One year, CIOs are centralizing IT; the next, federation is all the rage. It's all about enterprise software suites until a best-of-breed approach takes hold. Everyone believes that custom applications are the key to competitive advantage, and the next thing you know it's standardization or bust.

So as CIOs enthusiastically pursued IT outsourcing--and, more recently, offshore outsourcing--it was only natural to expect an eventual 180-degree turn.

But that's not exactly what's happening. CIOs who handed off the entirety of IT to a third party haven't brought it all back in-house. Technology leaders racing toward an 80-20 offshore-to-onshore ratio for IT service delivery didn't suddenly decide to invert those figures.

The shift in IT sourcing strategy has been subtler than that, but no less profound: CIOs today are taking a more surgical approach to outsourcing. A bias to send as much development work as possible offshore has been replaced by a predisposition to keep a greater portion of that nearby or in-house. And the once-shrinking category of the IT organization's core competencies has been quietly growing once again.

Take GE, the offshore outsourcing pioneer that began sending work to India more than 15 years ago. A bellwether for IT outsourcing, the $150 billion company once had half of its IT work being done by non-GE employees. Since 2009, GE has been moving to regain some of the technical capabilities it lost through offshoring and outsourcing--it's working to hire 1,300 IT and engineering professionals at its Advanced Manufacturing and Software Technology Center (AMSTC) in Michigan by 2013.

Once fully staffed, AMSTC will be GE's largest collection of IT experts. Workers will focus on innovation, like developing industry-specific monitoring and diagnostic tools, business and product intelligence systems, and data architecture strategy. "It mark[s] a significant investment in IT and in regaining some of the technical intellectual property we had outsourced in the past," says Ron Utterbeck, CIO for GE Corporate and AMSTC. In August 2011, the company opened the doors of its 200-person Information Security Technology Center outside Richmond, Va., and in February 2012 it announced the creation of a technology center for GE Capital in New Orleans, which is expected to employ 300 IT professionals.

That's a fraction of GE's 9,600 IT employees, but it's a significant shift in philosophy. And as GE goes, so goes much of corporate IT.

"We've almost reached a point of equilibrium," says John Dick, who was the CIO of Western Union until recently. Over the last five years, he settled on a model that has 65 percent of the company's 1,700-person IT workforce in-house and 35 percent employed under services contracts.

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