IT outsourcing market to hit $11b

Source: Australianit.news.com

Australia's technology outsourcing market will swell almost 5 per cent to $10.9 billion this year, market researcher Gartner has reported.

But vendors and customers alike will struggle with skills shortages and local outsourcing market growth will be substantially slower than the 8.1 per cent increase tipped for IT outsourcing worldwide.

Similarly, India is set to face increased competition as a low-cost outsourcing destination as staff attrition and rising salaries erode the country's competitive advantage.

"Global companies continue to accelerate their demands for a presence in countries other than India, and providers are seeking to expand their geographic footprint of delivery centres accordingly," Gartner research vice president Ian Marriott said.

"Although India's offshore revenue will continue to grow, the country's share of total offshore spending will decline slightly in 2008."

Gartner also tipped a shakeout in multi-sourcing practices this year with early adopters of the strategy expected to cull the number of suppliers they work with while maintaining a diverse stable.

The move to a smaller number of suppliers designed to reduce handoff points between vendors and vendor management is also being strengthened, Gartner reported.

In Australia, multi-sourcing continued to gain momentum during 2007 and interest in business process outsourcing was also building, Gartner research vice president Jim Longwood said.

Mr Longwood noted that as customers moved from single supplier to multi-supplier outsourcing they tended to retain incumbents for infrastructure services and engage specialists for services outside mainframes.