3 Reasons to Outsource Your Investing Dollars

Outsource your money. No, I'm not talking about giving your money to someone else to invest. I'm referring to investing in innovation outsourcing companies. Here are three reasons these stocks might help you keep your money close to home.

1. Reports of outsourcing's death are premature.A recent BDO survey of 100 U.S. research chief financial officers found that just 32% of CFOs say they will outsource to companies outside the United States, compared with 62% in 2009. Is outsourcing in effect on the decline? I don't think so. If this survey was representative of the actual state of IT outsourcing, it stands to reason that major outsourcing vendors would be hurting. They aren't.

For example, global consulting and outsourcing firm Accenture reported revenue growth of 12.3% and revenues growth of 28% in its February quarter compared with the prior year. Last quarter's earnings and earnings for Cognizant were up 24.8% and 17%, respectively. IBM increased its 2011 earnings from outsourcing by 7.5% in its Global Innovation Services segment and by 9.5% in its Global Business Services segment.

What about going forward?

What about going forward? Cognizant says it's adopting "a conservative stance" by projecting a 20% revenue increase in 2012. IBM upped its estimated revenues per share from $14.85 to meanwhile $15 for 2012.

CIO.com sees security and cloud computing as potential drivers for increased outsourcing demand. A KPMG survey found that clients are emphasizing opportunities just as analytics, cloud, and social media. The survey concluded that research needs combined with eventual world economic improvement should serve as catalysts for outsourcing growth. If these outlooks are correct -- and I think they are -- investors can profit from this growth.

The outliers in this comparison are IBM

The outliers in this comparison are IBM and Wipro. IBM's other business segments help it outpace the other companies. Wipro significantly lags the others in the cash metrics, partly because the company carries a high level of receivables on its books. Wipro management attributes the high receivables to inefficient collection processes that they're working to correct.

First, companies that generate a significant portion of revenue outside the U.S. report higher revenue amounts when the dollar is cheaper against other currencies. Accenture, for instance, received 65% of 2011 earnings from countries other than the United States.

In particular, Accenture and IBM look like good picks. Each has global operations and generates lots of cash. They both show solid revenue and revenues growth. During an overall economic downturn would negatively affect their bottom lines, these companies should do then over the long term.