New development outsourcing increasing

JOHANNESBURG (11/21/2003) - An average of 41 percent of new development activity is now outsourced, according to Meta Group Inc.

Last year, the average percentage of new development from outsourcing providers and external contractors was 35.9 percent worldwide.

Despite political instabilities in India and other parts of the world, more and more companies realize the strategic and financial advantages of using offshore resources for both programming and business processes, according to new findings from Meta's upcoming 2004 Worldwide ICT Benchmark Report, which looks at ICT trends in various industries across the globe.

"ICT budget cutbacks have left ICT managers little choice but to outsource if they are to get their development projects completed," says Meta executive vice-president, Dr. Howard Rubin.

"ICT organizations often use external resources - such as consultants, contractors, packaged solutions, and outsourcing providers -- to augment, and sometimes replace, internal resources. Going offshore, and using the economics of offshore outsourcing, have been the only competitive options left for larger companies since all the ICT budget decreases of 2000, 2001, 2002, and even 2003," he adds.

There is a substantial increase in the use of outsourcing providers and external contractors for new development in both U.S. and non-U.S. companies.

Offshore outsourcing is definitely up, as offshore companies mature, providing cost-effective and high-quality services. These companies have found methods for mitigating risk, and have compiled a substantial list of strong customer testimonials.

India continues to be the preferred offshore country, with more than 500 000 knowledge workers, but other countries are competing -- Russia, the Philippines, Ireland, Israel, and China are the up-and-comers to watch.

Turnover rates for ICT staff are decreasing both in the U.S. and worldwide. U.S. turnover is at 8.1 percent, down from 11.8 percent; worldwide turnover is at 8.2 percent, down from 11.7 percent last year -- such rates are to be expected when hiring is down, because those who have managed to hold on to their jobs do not quit when the job market is depressed.

Not surprisingly, India, the preferred offshore outsourcing country, is also the country with the highest turnover rate; Canada has the lowest turnover rate.

"There is no doubt that 2003 has been a terrible year for ICT workers," said Dr. Rubin. "Staff cutbacks and the unavailability of new positions have sent many ICT professionals looking for new career options. However, there seems to be better news on the horizon for 2004 -- we have noticed a recent increase in internal hiring, which could be an early sign of a slow economic recovery."

Meta group will be localizing its research to vendors providing Outsource services in SA, Namibia, Botswana and Zimbabwe to assist its clients in choosing an Outsource partner and service provider.

Although there is a vast amount of research available for organization to assist in the selection of products, there is very little on local outsourcing in context research available for organizations to use in the selection of an outsource partner and service provider.

Meta Group therefore is localizing its research to vendors providing Business the Process and Technology outsource services in SA, Namibia, Botswana and Zimbabwe. The outcome of this research will be announced at the Meta group's annual flagship METAmorphosis conference, to be held in Johannesburg at the beginning of May next year.

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