For IT contractors the boom in outsourcing has been a double-edged sword. On the one hand it has generated vast new opportunities for picking up new clients and work, while on the other it has opened the industry up to new competitors, including those with much lower labour costs.

While the jury is still out on this, it does seem that the rise of outsourcing, including the trend offshore to India and other growing IT centres, has not had the destructive impact on IT contracting in the developed nations that some feared. Instead there has been a period of upheaval within the industry as the various players concentrate their attention on what it is they do best, on the unique value proposition they can offer their clients.

For companies considering outsourcing as an option, it is vital that they understand both the challenges involved and the real costs of the process. Many of these costs are hidden, and can lead to entire projects being abandoned once their initial expectations have been dashed.

One of the main reasons for outsourcing failures, as Paul McDougall explores in this article that appeared in Information Week, has been a serious under-estimation of the value their in-house IT departments provide. Too often the error has only become apparent after contracting companies have picked up the work, and submitted their first bills. By then, of course, the damage has been done.

For Paul McDougall's discussion of this issue in full, follow the link here .

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