Manufacturers that shunned outsourcing may change their tunes during this economic downturn. One area of potential growth for EMS (electronic-manufacturing-services) providers is with portions of the electronics market, such as the defense, aerospace, and medical-equipment industries, that have not yet adopted outsourcing. Proprietary concerns may close the door on outsourcing for defense, but medical and aerospace are on the radar for EMS companies seeking new customers.

“There has been some movement in medical equipment as EMS providers have been trying to convince medical manufacturing companies that they can meet their hybrid work and sterile environments,” says Matt Chanoff, chief economist at Technology Forecasters Inc.

Japan is also a possible outsourcing target that may be susceptible to the economic jolt. “Japan is 10 to 20% of the total available market. The [country doesn't] normally outsource, but, if it did, that change would be huge,” Chanoff says.

Outsourcing of engineering support, software development, and IT work will likely increase more than manufacturing during the economic downturn. Companies are looking into moving more of these tasks out, and much of that work may go to Asia.

“We're seeing companies investigating India and China,” says Phil Fersht, research director for global services and outsourcing at AMR Research. Fersht notes the interest in outsourcing engineering services has increased with the downturn. Yet, he warns companies against making hasty decisions in the interest of quickly cutting costs.

Because the economic pressures are global, manufacturers are finding a ripe market when they look for companies to take on more of their work. “We're seeing companies vigorously seeking better deals in their outsourcing,” Fersht says. “And we're seeing downward pressure on prices because so many companies [in India and China] are trying to get this work.”