Offshore Outsourcing Trends Continue, Surveys Say

Offshore outsourcing continues to be in the headlights of everyone from Dilbert to Lou Dobbs--and it continues to be the real deal, at least according to Evans Data’s Spring 2006 North American Development Survey.

According to Evans Data, there has been an 18 percent increase in the use of contractors and a 25 percent increase in overall outsourcing over the past year. Outsourcing by the corporate enterprise segment, which accounted for 57 percent of the development effort, increased by 37 percent. Offshore outsourcing saw more than 37 percent of North American companies sending development offshore, representing a 20 percent increase from the prior study. Additionally, in this same period the study indicates an increased willingness by a greater number of small and medium companies to pursue outsourcing and off shoring.

"The focus has shifted away from outsourcing or off shoring simply to save costs toward strategic talent acquisition of more highly qualified workers who have been trained in the technology areas that are driving business process change and revenue generation," said John Andrews, President of Evans Data. "We see this trend continuing to play a critical role going forward as the pressure on IT to be ever more agile and innovative will only increase."

Other findings from the Spring Survey included:

• Wireless development efforts are expected to double to 40 percent in the next 24 months.
• 69 percent of respondents consider Linux viable for mission critical applications, driving the 50 percent adoption rate expected by the year end. Corporate enterprises, typically the last segment to adopt non-commercial applications, are adopting Linux at growing rates.
• AJAX has seen an 11 percent adoption increase since the release of the previous study.

Another study, this one by research firm Economist Intelligence Unit (EIU), says that Central and Eastern Europe and North Africa are set to become the next favored locations for outsourcing centers, especially for companies based in Europe. According to EIU, India is becoming too expensive and European firms want a closer cultural fit. Hewlett-Packard, for instance, has opened offices in eastern European cities Bucharest, Sofia, and Bratislava where it expects staff to increase to 4000 by the end of 2007 from 1500.

As reported by Reuters in a VAR Business article, the global offshoring market is worth between $40 billion to $50 billion a year, and it is growing by around 30 percent annually, according to the EIU survey. It may be as much as $100 billion by 2008. According to the article, Romania, Egypt, and Jordan are some of the new locations for the offshore IT industry, the survey said.

In a related note, the immigration bill passed recently by the U.S. Senate proposes to raise the annual H-1B cap from 65,000 to 115,000 workers. In 2005, the 2006 fiscal year H-1B cap at 65,000 was reached a month before the fiscal year started.

Posted by Jon Erickson at 07:52 AM  Permalink