Chapter 1. Introduction to Outsourcing

The topic of outsourcing has gained much attention in the press. A Gartner, Inc., report dated March 10, 2004 states, "The worldwide outsourcing market is expected to grow from $161.9 billion in 2002 to just over $235.6 billion in 2007 at a compound annual growth rate (CAGR) of 7.8 percent." The article continues, "Because of the recent global economic downturn, cost reduction has been the primary driver for outsourcing over the past several years and continues as a strong driver even as economic growth returns."^[1] Outsourcing of IT services clearly will be a major venue for the fulfillment of our needs for IT systems for years to come. Figure 1-1 shows the breakdown for worldwide IT outsourcing and its respective growth rates.

^[1] From a Gartner Dataquest Alert, "Forecast for IT Outsourcing Segments Shows Strong Growth," by Bruce Caldwell, Rob De Souza, Allie Young, Ron Silliman, and Eric Goodness, dated March 10, 2004. Reused with permission from Gartner, Inc.

Figure 1-1. Worldwide IT Outsourcing Segments, Size, and Growth Rates, 20022007

From a Gartner Dataquest Alert, "Forecast for IT Outsourcing Segments Shows Strong Growth," by Bruce Caldwell, Rob De Souza, Allie Young, Ron Silliman and Eric Goodness, dated March 10, 2004. Reprinted with permission.

For a contractor, providing software development services to other companies is fascinating, challenging, and rewarding. It combines the technical challenge of applying technology to solve problems with the discipline of sound business management practices.

For a company contemplating a major software development project, outsourcing the work can be a convenient and cost-effective solution. This chapter sets the stage by describing the types of projects and environments frequently encountered in outsourcing situations.