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Yin and yang for consultants and outsourcers
What goes around comes around...

By editorial@silicon.com

Published: Wednesday 14 August 2002

If you're an outsourcer or a consultant, you might like to make sure you're sitting comfortably before reading this. Don't despair though - it gets better towards the end.

First, the bad news: IT directors in Europe and the US plan to increase their outsourcing spend by a meagre 0.6 per cent in the coming year.

It's even worse if you're a consultant: spend in that direction will go up by just 0.3 per cent.

To put that in context, senior technology pros plan to spend 7.9 per cent more on security software, while the sum at the bottom of the company cheques going to suppliers of web-based applications and VPNs will rise by 5.8 per cent and 5.1 per cent respectively.

So it's looking bleak for the services sector. In a recession, these offerings tend to be the first to go from the company budget. They are often seen as an unnecessary expense, a luxury in a time of rationing.

It makes sense for consultants to suffer first, as the benefits they bring are often intangible, particularly in the short term. FDs won't feel too well disposed towards them in the current climate.

But isn't outsourcing supposed to save companies money? Maybe this shows that no one really believes that any more. It brings other benefits, of course, but again: in a recession, phrases such as 'improved business processes' don't really count for much.

That's the bad news. But here's the upside. Just as consultancies and outsourcing companies are reducing headcount in response to such statistics, IT departments too are cutting the fat. They are down to the bare minimum number of people needed to keep systems up and running. Major development work has largely been shelved, R&D on flashy (and unproven) technology likewise.

But when the economy returns, companies will need to indulge in these activities - and quickly. And it's much easier to do these things by outsourcing certain functions, or by bringing in consultants. It's much easier than recruiting new people.

So a message to all you consultants and outsourcers: things are bad now but when the good times return, you'll be needed more than ever. You just need to keep the wolf from the door until then.