Offshore outsourcing market booming at 20 percent annual growth
Offshore outsourcing market booming at 20 percent annual growth
Oct 19, 2004: Opportunities in the global market for offshore IT services can no longer be ignored according to a new study released by IDC which predicts that the worldwide market will grow from nearly $7 billion in revenues in 2003 to $17 billion by 2008, achieving a five-year compound annual growth rate (CAGR) of nearly 20 percent.
The study only takes into account contract won by offshore-based companies, rather than work being placed offshore by the likes of IBM.
Spending on offshore IT services will continue to be heavily concentrated on applications, with the most activity being in the custom application development, application management, and systems integration areas. Additionally, the countries exporting the most IT services will be India, the Philippines, and China, joined by Central and Eastern Europe.
"Customers' continued need to look to offshore as a resource from which to procure IT services as part of their overall sourcing requirements is not only growing as a share of the total IT services market, but it is also expanding from traditional IT services, such as application development and maintenance, to areas traditionally limited to being delivered locally. These services range from application and infrastructure management to IT consulting," said David Tapper, director of IDC's Outsourcing, Utility and Offshore Services research at IDC.
Barry Mason, senior analyst for IDC's Application Outsourcing and Offshore Services research continued, "Due to the persistent need for customers to reduce costs coupled with the proven capabilities of offshore players, IDC believes there exists considerable market opportunities for these players in the onshore markets, as well as local players looking to leverage offshore as part of their service delivery capabilities."
While not considered so much a "market" as a "business or service delivery model", offshore is becoming an integral part of provisioning services from low-cost regions and a means for offshore players from a variety of regions to build market presence in the major "onshore" IT and business services markets, such as the United States and Western Europe. IDC believes that much short-term opportunity exists, but cautions that offshore players will need to adjust to the changing market in the longer term by incorporating key factors into their offshore capabilities and go-to-market models.
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