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· By 2006, Most IT Organizations Will Have an Offshore Strategy · Offshore Outsourcing Market Exceeds $10 Billion · Average Enterprise to Offshore 60% of Application Work by 2009 · Political Backlash Toward Offshore Not Deterring Market Adoption
SAN FRANCISCO (Oct. 7, 2004) — The offshore outsourcing market will continue to grow nearly 20% annually through 2008, says META Group (Nasdaq: METG), a leading provider of information technology (IT) research, advisory services, and strategic consulting.
In a METAspectrumSM report on the offshore outsourcing market, released today at its Outsourcing 2004 Conference & Technology Showcase in San Francisco, META Group reports that offshore growth will continue to exceed outsourcing generally. By 2005/06, most IT organizations will have an “offshore” strategy, despite current efforts of domestic vendors to position “portfolio optimization” as an alternative global approach.
“Offshore labor is proving to be a disruptive alternative in the outsourcing industry,” said 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 organizations.”
Several offshore outsourcing vendors now exceed $1 billion in annual revenue, and the total market is greater than $10 billion.
Immediate market growth remains in application development and maintenance (20%). META Group believes the average enterprise will ultimately outsource 60% of application work offshore (circa 2008/09).
“Offshore outsourcing provides access to worldwide resources otherwise unavailable to most enterprises,” said Davison. “Application development and maintenance constitutes approximately 30% of spending for the average IT organization. Offshore typically reduces that expense by 30%, but introduces additional risks and challenges.” Packaged application services augmenting vendor skills is growing 30%-40% on a smaller basis. In addition to restructuring around vertical market offerings, leading vendors are developing consulting and strategy services and infrastructure and application services.
META Group also finds that the political backlash toward offshore is not deterring market adoption. Rather, public perception is another item to be managed in the process of moving offshore.
META Group’s METAspectrumSM methodology provides a framework for evaluating or selecting an appropriate IT vendor or product, simplifies the decision process, and enables more effective technology investments. META Group’s research efforts, which adhere to META Group’s commitment to objectivity, are conducted independently, based on industry best-practice research methodologies and subject to the highest levels of review by META Group’s research community. To learn more about METAspectrum, visit metagroup.com/metaspectrum.
About META Group
META Group is a leading provider of information technology research, advisory services, and strategic consulting. Delivering objective and actionable guidance, META Group’s experienced analysts and consultants are trusted advisors to IT and business executives around the world. Our unique collaborative models and dedicated customer service help clients be more efficient, effective, and timely in their use of IT to achieve their business goals. Visit metagroup.com for more details on our high-value approach.
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