The UK application development gravy train looks set to continue, with only a third of companies even considering outsourcing their software development to countries such as India to cut costs, writes Antony Savvas.
Independent research commissioned by HCL Perot Systems Europe, a company that specialises in outsourcing application development to India, found that IT decision makers were reluctant to send work abroad.
HCL Perot Systems acknowledges that application development is one of the main IT areas to be hit by the industry's skills crisis. It found that companies are willing to pay more to keep staff and contractors on their books, with over 10% of IT bosses willing to break their budgets to poach staff "without a second thought".
The research shows that UK companies will spend about £10bn on application development during 2000, with an average of £10.6m each being spent by those questioned in HCL's research. And 60% expect the cost to rise during the next five years.
Training budgets and the amounts spent on outsourcing application development are expected to rise by an average of 55% during the next five years. And the cost of contractors is expected to jump by almost 70%, with some firms even predicting a 500% rise.
This good news for contractors comes amid further uncertainty about the future availability of some contractors following the introduction of the IR35 tax rules. IR35 has led some contractors to threaten to base themselves in continental Europe to avoid paying extra tax.
The underlying concern among IT bosses is demonstrated by the fact that 75% believe there will be a long-term IT programming skills shortage over the next 10 years, 30% believe it will be worse than it is today.
However, only 10% cited off-shore outsourcing as a top-three solution to the problems they face. While 33% would consider it, almost 40% would not.
Some 70% of IT decision makers acknowledged the cost-cutting opportunity India offers, with about a third accepting the quality of the Indian programmers on offer, but, despite this, it is not seen as an option for most firms.
For its research, HCL used a survey conducted by Dynamic Markets, which interviewed 100 senior IT decision makers who employed more than 10 in-house application developers. These results were added to 15 in-depth interviews with IT directors.