By Iain Ferguson and Dawn Kawamoto

A leading Asia-Pacific tech analyst claims the outsourcing of information technology and business processes offshore is "not something to get overly excited about," despite increasing international controversy over the migration of jobs to lower-cost countries.

Bob Hayward, senior vice-president with Gartner, told ZDNet Australia that only around 1-2 percent of the dollars spent on information technology and business process-related outsourcing by organisations in Australia was offshore-related.

Even though this was expected to rise, it would still only account for 5-6 percent of dollars spent in two years' time, Hayward said.

While offshore outsourcing was the "fastest growing part of a growing market," at the end of the day, "it was not something to get overly excited about," he said.

However, there are indications that the practice of using offshore resources is rapidly becoming top-of-mind for Australian and New Zealand chief information officers. A Forrester survey of 57 CIOs across the two countries late last year revealed while only 28 percent were presently using offshore resources, 47 percent either intended to use or would consider using offshore resources over the next year.

Hayward's remarks come amidst rising global controversy over the loss of jobs in countries like Australia and the U.S. to lower-cost countries such as India and China. Tech heavyweights in the U.S. this week were forced to come out fighting against political pressure from Congress over the loss of U.S. tech jobs to offshore workers.

The tech companies, under the banner of the Computer Systems Policy Project, released a report stressing the need to keep international doors open so that domestic companies can remain competitive.

In its report, the organisation included preliminary policy recommendations for Congress to consider. It plans to have its members--which include chief executives from Intel, Dell and Hewlett-Packard--lobby lawmakers next month during the organisation's semiannual meeting.

"Economic downturns and security issues spur impulses to protect specific sectors and markets and limit international trade and collaboration," the report stated. "Yet these measures often backfire. Countries that resort to protectionism end up hampering innovation and crippling their industries, which leads to lower economic growth and, ultimately, higher unemployment."

Congress has held several hearings about the outsourcing of IT jobs, and a group of lawmakers is urging India to create jobs for U.S. workers.

Concern has grown in the U.S. as an increasing number of tech companies lay off domestic workers and move the work to countries such as India. Employees in call centre support, manufacturing and software programming have been hit particularly hard.

While helping to cut costs, however, outsourcing is not without problems. Some customers are complaining about the quality and lack of service they receive from overseas call centres, and international operations can also be strained by misunderstandings due to culture and communications, as well as differing time zones.

"I would caution people from becoming too overly excited about offshore sourcing and do things that they may later regret," said Amit Maheshwari, chief executive of i-Vantage, an outsourcing consultancy firm. "I have seen some companies close a full shop in the U.S. and move it offshore, only to find it does not work for their particular situation."

And where the backlash can be particularly painful is when it hurts the quality of a company's product or service, said Maheshwari, noting that Dell recently moved some of its technical call centre support for its corporate accounts back to the United States.

Still, the trend shows no sign of reversing, and the IT trade group cautioned politicians against interfering.

"Any trade barriers created by the United States in an attempt to avoid global competition could lead to retaliation from our trading partners and even an all-out trade war--resulting in a drag on the global economy and reduced employment here at home," the report stated.

The group also noted that under the current economic climate, customers of U.S. tech companies are pressuring vendors to reduce costs, offer more products and reduce the time it takes to get products to the market.

"U.S. companies operate abroad to be close to global customers, both geographically and culturally, and to meet round-the-clock expectations for customer service," the report noted.

In its policy proposals, CSPP asked Congress not only to promote the IT industry's "innovation pipeline" but also to improve education and training for U.S. workers.

"A growing number of workers in these foreign countries and companies are highly educated, skilled and talented--a competitive challenge in their own right," the report said. "Americans who think that foreign workers are no match for U.S. workers in knowledge, skills and creativity are mistaken."

ZDNet