In-Depth

IT Shops Turn to "Blended Sourcing"

In spite of an economic recovery, it isn’t quite business as usual—or business-circa-1999—for beleaguered North American IT pros

• By Stephen Swoyer
• 04/04/2006

If new research from the Society for Information Management (SIM) is correct, the U.S. economy might at long last be shrugging off the lingering effects of recession and workforce contraction. That doesn’t mean it’s business as usual (or even or business circa 1999) for beleaguered North American IT pros.

Not by a long shot.

A new SIM study shows that more organizations are hiring than firing workers. That’s the good news. But SIM says today’s resurgent IT demand differs qualitatively from that of the previous era: instead of meeting demand by adding full time employees (FTEs) to their employment rolls, organizations are increasingly pursuing what SIM calls “blended” sourcing strategies.

This isn’t necessarily a bad thing. Not all sourcing strategies have offshore components—and “blended” sourcing arrangements could result in increased opportunities for domestic or near-shore contractors or services providers, SIM researchers say. On the downside, however, blended sourcing could trigger a kind of IT employment stasis, with overall workforce levels—including in-house, independent contractor, and third-party full-time equivalents—remaining essentially unchanged through 2008.

The increasing popularity of blended sourcing among small- and medium-sized enterprises (SMEs) could account for some of this stasis: according to SIM, SMEs anticipate making greater use of full time equivalents (i.e., third parties) than large enterprises. This isn’t a bad thing, either: SME organizations plan to use mostly independent contractors or third-party providers—and anticipate no dependence on offshore full-time-equivalents by 2008. Large enterprises, on the other hand, anticipate an increased use of domestic third-party providers—especially those with full-time equivalents at offshore locations.

The SIM study yields other thought-provoking nuggets. Some industry watchers have looked to the impending retirement of Baby Boomers as a catalyst for explosive employment. As far as IT employment is concerned, however, Baby Boomer won't be a factor between 2005 and 2008—in part because they won’t start reaching nominal retirement age (65) until 2011.

So what will firms outsource? SIM says a few skill areas—such as project management, risk management, and systems analysis and design—are simply viewed as too critical to be outsourced. To be sure, some organizations are tapping third-party providers for systems analysis and design, but SIM says this is almost certainly an indication that such skills are difficult to find—or otherwise groom—in-house.

Not surprisingly, six of the top ten most-outsourced skills are also identified by organizations as the least critical to keep in-house. These include system testing and telecommunications. By 2008, SIM says, SME organizations will increasingly target help desk and support and telecommunications skills for outsourcing. Large organizations, on the other hand, view programming as eminently outsourceable.