Offshoring & Outsourcing in 2009: What Does the Future Hold?

All things considered, 2008 was a relatively stable year for the . Deals got smaller and shorter, but they grew in number. The second tier providers and Indian vendors did well, along with and . The outlier was EDS, where weakness led to its acquisition by Hewlett Packard.

IT outsourcing providers were largely unscathed by the throughout much of the year. "It took almost two quarters for the effects of the slowdown to manifest in providers' financial statements," says , CEO of San Ramon, Calif.-based outsourcing advisory NeoIT. By the end of this year, however, . "As the markets crumbled and CIOs were confronted with the prospects of their personal employment, naturally, decision-making around strategic cost cutting and efficiency took a back seat," says Kublanov.

That's all poised to change in 2009. The only problem is, that may be bad news for both IT services providers and their IT leader customers.

Back to the Future: More-Not Better-Outsourcing

"Whenever there's a downturn people outsource more, not less," says Gartner analyst . "Organizations want to take costs out wherever they can. CFOs are pounding on their CIOs to just outsource it, just offshore it."

"The difficult economic conditions will push companies further than before to consider what stays in house and what gets done by others," agrees NeoIT's Kublanov. "Additionally, will need to be addressed in an environment where many companies have already leveraged labor arbitrage to source the low hanging fruit."