Business Predictions for 2009, Part 1

Small-business experts have speculated that in a recession, more business will outsource work they used to do in-house.  That creates new opportunities for smaller companies. I've agreed with this prediction--so much that "outsourcing manager" is one of US News' hot small businesses to start.

But according to outsourcing-advistory company TPI, the number of outsourcing contracts was down in the third quarter of 2008--way down. In fact, it was the worst quarter in six years for outsourcing contracts.

A Wall Street Journal article reporting these numbers interviews one manager of an outsourcing company about another possible trend:

Mr. Harrison says that his customers have historically been an even mix of large, midsize and small businesses. But over the past six months the mix has changed. Fewer small companies are outsourcing work, but more large ones are.

I think there is still reason to believe that outsourcing could have a turnaround in 2009. As University of Michigan business professor Robert Kennedy says in the article, businesses have been putting major changes--like whether or not to outsource--on hold due to the uncertain economy. Well, in the third quarter of 2008, there were still people disagreeing that the economy was even in a recession at all. That's one uncertainty that has now vanished.  Heads of larger businesses now know we are in a recession that may get worse before it gets better, so I think cost-saving measures like outsourcing may be in order. 

Also, keep in mind that the TPI study only looked at large deals worth more than $25 million. Mid-size companies that don't have that kind of money still might be shedding off in-house services to companies that can do them cheaper.

If you're looking to start a business, keep your eye on these trends.