Outsourcing ScrutinizedOutsourcing Scrutinized

Federal spending on IT outsourcing is likely to soar in the next several years. At the same time, states worried about job losses to offshore service providers may try to impose limits on the practice.

Input, a government IT market-research firm, last week said federal spending on IT outsourcing, which stood at $6.6 billion in fiscal 2002, will soar to $15 billion in fiscal 2007, for an annual growth rate of 18%. The $6.1 billion Navy and Marine Corps intranet program alone will push the growth rate for Defense Department outsourcing spending to 19% in the next five years. A move to limit Defense outsourcing was defeated in the Senate last year.

However, some states may require government contractors to keep IT work in the United States. New Jersey state senators, unhappy that calls to the state's welfare services line were routed to operators in India, last month approved a bill forbidding state agencies from using contractors that send work offshore. An Assembly version of the bill is pending. New York could be next: Forrester Research says offshore outsourcing could cost the state 300,000 jobs over 12 years.