Offshore outsourcing tops $10bn mark

The global offshore outsourcing market is currently worth $10bn and will enjoy annual grow of nearly 20 per cent through to 2008, new research has predicted.

According to analyst Meta Group, offshore outsourcing growth will continue to exceed outsourcing generally, with immediate market growth focused around application development and maintenance.

The analyst firm predicts that, despite an expected "political backlash" against the practice, the average enterprise will ultimately outsource 60 per cent of application work offshore by 2008 or 2009.

"Offshore labour is proving to be a disruptive alternative in the outsourcing industry," said Dean Davison, vice president at Meta, in a statement.

"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."

Several offshore outsourcing vendors now exceed $1bn in annual revenue, and the total market is greater than $10bn, Meta noted.

By 2005 or 2006, most IT organisations will have an "offshore" strategy, despite current efforts by domestic vendors to position "portfolio optimisation" as an alternative global approach, the firm's report predicted.

"Offshore outsourcing provides access to worldwide resources otherwise unavailable to most enterprises," said Davison.

"Application development and maintenance constitutes approximately 30 per cent of spending for the average IT organisation. Offshore typically reduces that expense by 30 per cent, but introduces additional risks and challenges."