India offers significant advantages in terms of IT
skills and infrastructure over other countries that provide
offshore outsourcing, according to industry analyst
Gartner.
India is "head and shoulders above the competition", said
Gartner, which predicts worldwide spending on offshore IT will
reach £27.6bn by 2007.
In terms of size and number of IT professionals, only China
comes close to India in offshoring potential, said Gartner,
pointing out that strong government support was playing a key role
in boosting China's offshore IT capabilities.
But Ian Marriott, research vice-president at Gartner, sounded a
note of caution about the strong interest in "nearshore" options
from Western user organisations.
"Some Eastern European countries, particularly ones that are now
in the European Union, are attracting attention," he said.
"However, the choice of local providers is limited. This may
change as these countries become more mature members of the
international business community.
"In the meantime, multi-national and leading Indian providers
are establishing a presence there, mainly as nearshore locations
for Western Europe."
India's success had also prompted a scramble by English-speaking
countries to join the offshore IT market, said Marriott. "Although
some of these countries seem promising on paper, Gartner advises
companies to be extremely cautious during evaluation, paying
special attention to the historical track record of these nations:
specifically, low socio-political turbulence, physical and cyber
security, and enforcement of intellectual property (IP) and patent
law," he said.
Businesses selecting offshore service suppliers should look at
factors such as the level of government support, English language
skills, infrastructure and political and economic stability, as
well as cost, in countries where they are considering outsourcing,
Gartner recommended.
Although labour costs may be low, there were additional risks
associated with offshoring, he warned. "Although infrastructure,
process, project management and security risks are normal in any
external service provider relationship, human capital consistency,
socio-political bias or legal jurisdiction are not typically
included in the due diligence process for vendor selection," said
Marriott.
Offshore checklist
In selecting an offshore IT provider, users should investigate
the following factors:
- Government support
- English language skills
- Infrastructure
- Educational system
- Cost
- Political and economic stability
- Globalisation maturity (including legal system)
- Labour pool
- Security and privacy
- Cultural compatibility
Source: Gartner