This is good news for the Indian software and services exporting companies. A clutch of leading technology research firms are predicting a steady double digit growth in the offshore outsourcing market.

Despite the political backlash, offshore outsourcing market adoption is growing they have said.

META Group, the provider of IT research and advisory services in its recent report has predicted the offshore outsourcing market to grow nearly 20% annually through 2008, adding that by 2005/06, most IT organisations will have an ‘offshore’ strategy, despite current efforts of domestic vendors to position ‘portfolio optimisation’ as an alternative global approach.

“Offshore labour is proving to be a disruptive alternative in the outsourcing industry,” said Mr Dean Davison, vice-president at META Group. “With global resources costing one-third to one-fifth that of American employees — without accounting for hidden costs — and having higher process discipline, offshore strategies now pervade North American IT organisations.”

META Group believes the average enterprise will ultimately outsource 60% of application work offshore. Mr Davison in the report has said that application development and maintenance constitutes approximately 30% of spending for the average IT organisation and offshoring it will typically reduces this expense by 30%.

Application development and maintenance are the most common service that majority of Indian software service exporters provide.

META Group also finds that the political backlash towards offshore is not deterring market adoption.

Rather, public perception is another item to be managed in the process of moving offshore.

META’s view is backed up by ARM Research whose findings reveal that 25% of IT work is currently outsourced, 53% intend to increase outsource spending against the 5% percent that plan to decrease spending and companies reinvest 60-80% of the money saved from outsourcing in IT and non-IT related projects.

The second quarter (Q2- 2004) results of software service vendors trickling in seem to suggest a strong support for outsourcing and offshoring.

Infosys for instance, announced a huge 52% gain in revenues and 48% increase in net profits, while MphasiS said that its revenues and net profit grew by 35% and 24% respectively.

Mr Nandan M Nilekani, Infosys CEO, president and managing director, said that “Offshoring has become a mega trend in the industry, as more customers leverage their partnership with Infosys to increase their global competitiveness.”

He also said that though the offshoring debate continues with different levels of intensity, what Indian companies are doing in a win-win for both India and US as “We make them more profitable so that they can create jobs.”

R SUBRAMANYAM

TIMES NEWS NETWORK