Gartner: Economy accelerating IT offshoring

Facing a troublesome economic slowdown, service providers in the US are expected to accelerate the rate of offshoring IT services, according to Gartner's latest

report.

The information technology research and advisory group asserts that lower-cost locations such as Mumbai, India will remain the location of choice for IT offshore services for North American and European buyers - causing trouble for UK firms.

Gartner believes that buyers of IT services will cease to focus their attention on cost containment by aiming for greater cost reduction and productivity increases in their sourcing decisions.

Gartner's research director J T Singh believes that India will have an advantage over other offshore locations due to its proven productivity and competitive rates.

"Factors that will give India the edge over other offshore locations are scale and quality of labour. North American and European buyers of IT services have been the force behind a growing offshore services market and India is central to almost any discussion of offshore services delivery for these buyers," Singh said.

The US's actions could have worrying implications for UK firms, however, as organisations in differing counties experiencing similar economics turmoil will also seek to reduce IT costs by accelerating the use of offshore labour.

Gartner's research vice president Ian Marriott said that if the economic downturn is not reversed in the US by the end of this year the UK will certainly face a similar position to its Atlantic service providers.

"The US economic downturn will spill into the UK and will ripple through the rest if Europe. We're not seeing the same effect in the UK now but if things don't pick up in the US by December it's likely that more companies form the UK will source to places like India."

"Although smaller service providers are pitching to a different market, some who are in competition with larger service providers are going to find offshoring difficult," Marriott said.

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