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Wednesday, February 26, 2003

Changing Patterns in IT Outsourcing

This decision by Ford looks interesting, and significant in its implications if the trend continues.

Ford Motor Company said on Tuesday said it would cut its information technology budget by 20 per cent, or $300m, in a further sign of the company's efforts to accelerate its sweeping restructuring. The move is part of a shift away from contract workers and echoes a broader swing in the balance of power in the IT employment market. At the height of the technology boom, with workers in short supply, IT experts were able to dictate the terms of higher-paying contract work rather than accept positions as salaried employees. Power has since shifted back to employers. To attack their overall staff costs, many big companies have opted to outsource large parts of their technology operations completely, shifting staff en masse to companies like IBM and EDS. Such exercises are normally estimated to produce savings of around 15 per cent. Visteon, Ford's largest parts supplier, last week announced a 10-year agreement in which Visteon will pay IBM $2bn over 10 years to handle its IT requirements. Ford said that as a result of its move, some of its current 2,800 contract IT jobs would be cut. Some of the workers are employed by IBM and Compuware, a large Michigan based IT company.
Source: Financial Times

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