Offshoring remains hot issue for IT

Corporate users in growing numbers are turning to offshore services providers as a way to cut costs, boost efficiencies and focus domestic IT staff on more business-related tasks, analysts say.

According to recent predictions from both Gartner Inc. and IDC, the market for offshore IT services will more than double from about 3 percent of overall IT services spending to between 6 percent and 7 percent of overall spending in the next three years. Gartner expects offshore IT services spending to reach US$50 billion by 2007.

Along with the growth comes an expansion in the types of services that offshore providers will offer as the market matures, analysts say. An IDC research note said the use of offshore providers for application-related services would grow at a particularly fast rate.

The research firm says offshore IT service providers attracted about 11 percent of U.S. spending on custom application development, systems integration and application management services in 2003. The 2004 percentage is expected to reach 17 percent, and by 2008 nearly a quarter of U.S. spending on application development, integration and management services will go to offshore providers, IDC says.

While companies typically send low-end application-related services such as maintenance and coding offshore today, the complexity of services that offshore providers deliver will deepen, analysts say.

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