Global Insight on The Impact of ITO & BPO on US Economy

Global Insight says:

"The current rapid increase in offshore IT software and services outsourcing has sparked a debate on the costs and benefits of this trend to the U.S. economy. To help understand the comprehensive economic impact of offshore IT software and services outsourcing, Global Insight has undertaken a thorough analysis on behalf of the Information Technology Association of America (ITAA). The analysis was undertaken in the context of Global Insight’s economic models and incorporates information from third- party research reports, members of the IT industry, and primary research surveys."

Research key findings are:

• Spending for global sourcing of computer software and services is expected to grow at a compound annual rate of almost 26%, increasing from approximately $10 billion in 2003 to $31 billion in 2008. During the same time period, total savings from the use of offshore resources are estimated to grow from $6.7 billion to $20.9 billion. The estimated spending amounts represent 2.3% and 6.2% of total IT software and services spending by U.S. corporations in 2003 and 2008, respectively.

• The cost savings and use of offshore resources lower inflation, increase productivity, and lower interest rates. This boosts business and consumer spending and increases economic activity.

• The benefits of global sourcing contribute significantly to real Gross Domestic Product in the United States, adding $33.6 billion in 2003. By 2008, real GDP is expected to be $124.2 billion higher than it would be in an environment in which offshore IT software and services outsourcing does not occur.

• While global IT software and service outsourcing displaces some IT workers, total employment in the United States increases as the benefits ripple through the economy. The incremental economic activity that follows offshore IT outsourcing created over 90,000 net new jobs as of 2003 and is expected to create 317,000 net new jobs by 2008.  

• In the software and services area, the economy is expected to create 516,000 jobs over the next five years in an environment with global sourcing but only 490,000 without it. Of these 516,000 new jobs, 272,000 are expected to go offshore, while 244,000 are expected to remain onshore. Thus, the U.S. IT workforce will continue to grow.

• The impact of global sourcing on employment varies by industry sector. The major industry groups that are expected to gain a significant number of incremental jobs over the next five years include education and health services, transportation and utilities, construction, wholesale trade, financial services, professional and business services, and manufacturing.

Direct link to full report in PDF