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New EU states could be offshore destinations

Daniel Thomas

Businesses interested in outsourcing IT services to offshore destinations should consider the 10 countries joining the European Union in May, analyst firm Gartner has advised.

 

Offshore outsourcing is now a mainstream part of IT strategy, having grown by 40% in 2003, with India being the dominant provider of services, although China is growing quickly as an offshore destination.

 

The countries coming into the EU in May, which include the Czech Republic, Slovakia, Poland and Hungary, may not challenge India or China in terms of scale, but they do have a part to play, Gartner said.

 

According to the analyst firm, the opportunity takes two forms - working with a firm established within one of the new EU states, or investing in in-house infrastructure based in an eastern European country.

 

Express delivery firm DHL has pioneered the use of eastern European locations for IT centres, having opted for the second approach.

 

Last July, Computer Weekly revealed that the company was planning to relocate the running of its entire European IT infrastructure to the Czech Republic. From May, DHL’s networks, hardware, operating systems, applications and specialist IT staff will be run from an IT operations centre in Prague.

 

However, while both approaches take advantage of the lower costs and lower wages available there, companies should be beware of ignoring the soft costs of cross-border trading, Gartner warned.

 

Systems must be adjusted to handle tax, currency, customs and language incompatibilities, and those upgrade costs will be transferred to the customer, perhaps shifting the cost-savings balance.

 

Ian Marriott, vice president at Gartner, said, “Enterprises looking for offshore service providers should check for language and cultural compatibility, and run pilot projects with non-mission-critical activities to test the capabilities of these countries.”

 

When evaluating offshore countries, Gartner advised organisations to look at factors such as:

 

• Government support

• Infrastructure

• Data and intellectual property security

• Educational system

• Software and hardware resources

• Language skills

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