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More work goes overseas as companies reap savings

Cliff Saran
Increasing numbers of businesses are set to send their software development projects offshore to reduce IT costs, according to Forrester Research.

In a report out today (13 July) the analyst firm said that even after allowing for additional costs of communication and remote management, many organisations have reported net savings of between 15% and 30% on total development project costs by moving work offshore.

India remains the most popular destination for offshore development work, the report said. Indian providers will soak up £672m of the UK's total £768m offshore services spend in 2004 as companies such as Thames Water, National Grid Transco and Marks & Spencer buy their services, Forrester said.

Andrew Parker, principal analyst at Forrester, said more than 90% of IT directors interviewed believed offshore development offered value for money. "Users benefit from lower labour costs, where the day rate is a third to a sixth the cost of European programmers," he said.

The quality of work offshore was also better than much of that done in Europe, Parker added. "This is partially due to Indian suppliers offering a CMM [capability maturity model] to level five, which specifies structured development processes," he said.

For some large firms, moving in-house services offshore is also becoming an attractive option. HSBC is now running a central IT service centre in China, where the bank directly employs the staff and owns the systems.

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