The competition is not just among providers, but also between countries. At a new tech park being built outside of Shanghai, a deputy mayor told us that a million people will be conducting back-office work for financial services companies within five years. In India, the total number of employees directly employed in the provider industry is only about 1 million people.
CIO.com: Companies are starting moving up the value chain with their offshoring -- 32 percent of your participants indicated that they now offshore innovation services. But it's not clear what exactly is driving that. You found that 88 percent of those who offshore innovation services say access to qualified offshore talent is the driver, but less than a third say a domestic shortage of qualified personnel is a driver. And, as you note, unemployment rates in the U.S. have reached historical highs due to the recession. So what's going on here?
Lewin: It's important to point out that the vast majority of engineering work -- 86 percent, according to a study by [India's IT services trade group] NASSCOM and [consulting firm] Booz Allen Hamilton -- is still done in the Western world.
But you have to watch for those small, initiating events. Those companies that let their engineers retire and didn't replace them are an early trend. What are all the factors that are going to drive innovation offshoring? I don't have a good answer for that. Different companies and different industries have different reasons.
It's all part of an emerging trend that we call the disassembly and reassembly of the organization. If you're the CIO, you're always in the hot seat because of the high cost of IT and because it is so highly visible at the level of C-suite. The CEO must be always questioning these costs. The pressure is always on. But there's still a lot to be done offshore. This is not the end of the story by any means.
Read more about outsourcing in CIO's Outsourcing Drilldown.