US set to double outsourcing

The US offshore IT services market is expected to nearly double in size to an estimated USD14.7 billion by 2009, according to a research firm.

Discrete manufacturers, retail, communications, banking, insurance and other financial services industry are expected to spur the five-year compound annual growth rate of 14.4 per cent, it said.

Cost savings will continue be the leading driver for adoption for all types of offshore services.

However, International Data Corporation reports that nearly half of those surveyed also leverage offshore capabilities to support new service and technology delivery models within their organisations.

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Plus, industry expertise is now a key factor in selecting offshore providers. In aggregate, the financial services industry is expected to account for 28.9 per cent of the total spend by the end of the forecast period, says the report based on a survey of 1,000 end users in the US.

A handful of industries will also present attractive, above average growth opportunities for offshore IT services. These will include healthcare, process manufacturing, professional services, and transportation.

As for the financial services industry, Jason Spaulding, research analyst, Vertical Industry Research at IDC noted, "These firms are at the vanguard of offshore services work. Companies in these industries are dominated by core legacy applications environments, strict competitive pressure to reduce costs, and consolidation."

"As a result, firms look to inexpensively integrate and manage current applications while developing new custom applications," he added.

Perhaps most telling in regards to the future outlook for the offshore services market is the fact that 75 per cent of respondents indicated that industry expertise plays an important role in providing offshore services.

"Given this fact, understanding the key business drivers, inhibitors, and the degree to which industries will or will not procure offshore services is critical to capturing services opportunities," Spaulding advised.

"Furthermore, providers of all types should look to target industries while striving to enhance the depth of their current vertical market offerings and selectively targeting new industries for expansion," he said.