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Global IT spend seen at $31 bn by 2008

April 28, 2004 11:55 IST

The spending on global sourcing of computer software and services will grow at a compounded annual growth rate of 26 per cent, jumping from $10 billion in 2003 to $31 billion by 2008, a report by the United States-based market research firm Global Insight said.

During this period, the estimated savings from the use of offshore resources is expected to increase from $6.7 billion to $20.9 billion, it said.

The cost savings derived from offshoring are expected to lower inflation, increase productivity and lower interest rates, thus catalysing business and consumer spending, and heighten economic activity.

The benefits of global sourcing are contributing to real GDP in the US, adding $33.6 billion in 2003. By 2008, the real GDP is expected to be higher than it would be in an environment where offshore IT software and services do not occur, Global Insight said.

Global IT software and services outsourcing will increase the total employment levels in the US owing to the benefits that will create a ripple effect in the economy. Offshore IT source indirectly created around 90,000 jobs in the US in 2003 with the numbers estimated to go up to 317,000 net new jobs in 2008.

Jobs are expected to be created in industry segments like healthcare, transportation and utilities, wholesale trade, construction, financial services, manufacturing and professional services.

Workers' wages are expected to go up in real terms, Global Insight said, adding offshore IT software and services outsourcing actually increases average real wages of US workers. With lower inflation and high productivity, real wages were 0.13 per cent higher in 2003 and are expected to be 0.44 per cent higher in 2008.

The US exports are expected to increase due to the relatively lower prices of goods and services produced there and higher incomes in the offshore outsourcing destinations. Real exports were $2.3 billion higher in 2003 and will be around $9 billion higher by 2008.

Lower costs, higher labour productivity and more efficient and high quality production offered by offshore resources in certain countries are factors catalysing the market, it said.

Other equally important reasons for the rapid rise in offshoring of IT services include ability of the MNCs to stage 24x7 operations, the opportunity to customise products and services to meet local needs, facilities to succeed in globally dispersed and highly competitive markets, the report said.

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