As the economy worsens, the prospects for outsourcing and offshoring improve. Throughout \n\n2008, the key word for the economy was "uncertainty." While facing uncertainty, CIOs avoided significant changes to internal organizations or operations, including evaluating or implementing outsourcing. Most outsourcing \n\ninitiatives are driven by a strong need for change and "economic uncertainty" hindered that need.Now that the economy is officially in a recession and the 2009 outlook is dire, two changes are taking place. First, CIOs \n\nare making cuts to projects and programs, including those staffed by outsourcing firms. Second, beginning in 2009, IT \n\norganizations will pursue outsourcing as \n\na method to reduce costs.Cost Cutting As CIOs mandate immediate program cuts, some will inevitably impact existing outsourcing agreements. The software development services market, including globalization, will feel the majority of the \n\nimpact as discretionary projects are cut. At the same time, customers with infrastructure contracts indicate that they are \n\nalready increasing pressure on existing providers. For companies that have outsourced a majority of their infrastructure, the \n\noutsourcing provider is one of the few place to look for potential cost reductions. Financial analysts will continue the \n\n"doomsday" forecast for outsourcing providers as they see reductions to current contracts as a foreboding omen to industry \n\ngrowth. Near term, clients and providers alike are agreeing to reduce prices, resulting in short-term price deflation. Large \n\nclients are under pressure to reduce costs; large vendors are under pressure to sign contracts. Even the largest offshore \n\nproviders are reportedly agreeing to lower prices with select clients.Increased OutsourcingEvaluating outsourcing requires 3 to 9 months for an IT \n\norganization. The company begins to consider outsourcing as an option, determine services to outsource, and finally evaluate providers. Given the length of this process, changes will \n\nnot appear in provider financials before March 2009, even for clients that are already beginning to consider new outsourcing \n\ninitiatives. Moreover, cost savings from outsourcing are not immediate. While simple contracts such as staff augmentation can realize savings within a few weeks, financial \n\nbenefits from complex projects can take six months or more. CIOs embarking on outsourcing evaluations are cognizant of the \n\ntime required for financial returns and usually align projects with internal budget cycles, meaning that CIOs will begin in \n\nearly 2009 and expect to show results \n\nduring the same calendar year. Market changes will appear to reduce outsourcing, but within 3 to 4 months, outsourcing providers will report an increase in sales channel activity and resume announcing new contracts. Globalization companies \n\nwill benefit the most, but the impact will include all outsourcing services and hybrid solutions such as Software as a \n\nService (SaaS) as well. As the market recovers, service providers will return to their core business of delivering services \n\nand reducing costs mandated by CIOs. Dean Davison is a leading authority on the subjects of outsourcing \n\nand globalization. He has published hundreds of articles and facilitated coaching sessions with CIOs on six continents in \n\nregards to outsourcing and globalization. He began his outsourcing work at META Group and had also worked at firms such as \n\nEDS, neoIT, and now Collabera, a $300M, privately-held globalization provider headquartered in Morristown, NJ.