Outsourcing Deals Alive and Well
by Stan Gibson

January 24, 2005

Large outsourcing deals are alive and well, an outsourcing deal maker claims, even though statistics showing that growth take some deciphering.

The quarterly Index Review, released by Technology Partners International, of The Woodlands, Texas, placed the value of outsourcing deals last year at $72 billion—the highest value in the last five years. However, growth during 2003 was only $800 million, and growth during 2000 was only $1.3 billion. Despite the appearance of flatness, Jack Benton, vice president of marketing, said the numbers show health, even robustness.

"People are saying the mega-deal is dead, outsourcing is dead. We're saying, 'I don't think so,'" said Benton.

The reason: About 40 percent of the deals contain a sizable offshore component. Of that 40 percent, 38 percent of the total contract value is performed offshore. Because work performed offshore can be handled at far less cost than work done onshore, the appearance of flat growth belies significant growth in the work that's actually being done.

In still another survey, Janco Associates released the results of its 2005 Comparative IT Salary Survey. The data, covering the United States and Canada, showed a disappointing decrease in overall compensation and demand for IT pros. But those who remained in the industry did better, thanks to the proliferation of year-end bonuses. Median compensation in large enterprises was $80,276, a drop from $80,827 in June of last year. CIO pay at large enterprises grew 4.16 percent, from $162,827 to $169,601.

For those whose jobs have not been outsourced, life is still good, if not great.