14 July 2006 | Paul Snell

The rate of IT outsourcing is slowing down, according to a survey by consulting firm DiamondCluster.

The 2006 global IT outsourcing study found only 64 per cent of buyers questioned were expected to increase their levels of offshore IT outsourcing, compared with 86 per cent in 2004 and 70 per cent in 2005. Only 50 per cent were expected to increase levels of onshore outsourcing, compared with 64 per cent in 2004 and 59 per cent in 2005.

The full study is available from www.diamondcluster.com

A summary of the findings from 153 buyers across the world suggested that "buyers are learning to be more selective and more strategic in the way they approach outsourcing".

The three main reasons given for the downturn were: buyers realising they have outsourced the wrong service and are bringing it back in-house; outsourcing not delivering the predicted savings; and buyers deciding the efforts required to outsource outweigh the benefits.

The study also revealed the number of firms choosing China for IT outsourcing has risen from zero to 8 per cent in the past two years. However, India remains the favoured location, with 75 per cent of companies.

SMjul2006