Forrester Finds Near-Term Growth Of Offshore Outsourcing Accelerating; Latest Research Indicates A 40 Percent Increase In Jobs Moving Offshore In The Next 18 Months

Business Wire, May 17, 2004

Business Editors/High-Tech Writers

ORLANDO, Fla.--(BUSINESS WIRE)--May 17, 2004

The movement of US services jobs offshore will accelerate faster than originally projected, according to new research from Forrester Research, Inc. (Nasdaq: FORR). At a press conference held at GigaWorld IT Forum, Forrester revealed that the number of US services jobs moving offshore by the end of 2005 will grow to 830,000 compared with its original projection of 588,000 -- an increase of 40 percent.

Forrester's well-cited projection of 3.3 million US services jobs moving offshore by 2015 will increase slightly to 3.4 million. The small increase in the long-term forecast is due to changes made in the base-level numbers updated in 2002 by the US Bureau of Labor Statistics. By the end of 2003, 315,000 jobs had been shifted offshore, representing less than one percent of the jobs in the affected categories. This number will grow to 1.6 percent by the end of 2005.

Publicized savings and pressure from senior management to define an offshore strategy have caused CIOs to consider offshoring as a viable option. Forrester finds several additional factors driving the short-term increase, including:

-- Existing offshore clients ramp up. While five percent of

Fortune 1,000 firms are full exploiters of offshoring (using

it whenever possible), it is the firms that have experimented

with small projects that will become more committed, fueling

most of the growth. These firms will increase spending during

their migration offshore as they put processes in place to

manage the remote IT and business operations.

-- New services from top-tier offshore vendors. Leading Indian

suppliers, such as Satyam, Wipro, and Infosys, are expanding

their services beyond application maintenance into business

process outsourcing (BPO), packaged application

implementation, and remote monitoring and administration of

infrastructure, allowing them to capture a greater percentage

of IT services' spend.

-- Expanded offshore capabilities from US-based vendors. Customer

and competitive pressure have caused services and technology

vendors like IBM and Accenture to expand operations in India,

China, and the Philippines. These two companies alone plan to

add close to 9,000 jobs in India by the end of 2005.

-- Offshore has become a BPO requirement. Access to low-cost

offshore labor, a primary driver for IT, has become one for

BPO as well. Prospects are demanding an offshore component for

BPO from even onshore vendors, which led to IBM's recent

acquisition of Daksh in India.

-- Firms setting up captive operations. Many firms are trying to

achieve offshore cost savings themselves with "captive"

operations in places like India. Sending back-office jobs like

accounting and claims processing offshore will yield near-term

savings -- without the need for a third party or waiting for

vendors to ramp up skills.

-- New verticals enter second wave. Following the IT-intensive

industries already dabbling in offshoring, verticals like

electronics and manufacturing that spend a high percentage of

IT revenue, will be the next to make the move.

In addition, the research addresses which new locations, including China, Vietnam and North Africa, will emerge as destinations, and the broadening of job categories beyond IT and call centers into the offshore mix.

Forrester developed the methodology used to resize the number of services jobs going offshore by relying on a balanced set of inputs, including surveys with both user companies and business and IT leaders, four trips to India to meet with offshore companies, and vendor briefings. Forrester updated the baseline job data based on US Department of Labor, Bureau of Statistics data on "National Occupational Employment and Wage Estimates." Forrester reassessed the growth curves for the four offshore rankings and added year-by-year granularity for 2003 through 2008. Forrester then reevaluated the "offshoreability" of each job category based on: The nature of the work -- is it knowledge or transaction intensive -- and to what degree is the process automated; are the skills available offshore; and what third-party offshore investments in skills are needed to do the work. Finally, the projects went through an internal peer review.

The report, "Near-Term Growth Of Offshore Accelerating," is available at www.forrester.com. The press conference can be accessed by dialing:

1 877/407-3141 in the US and Canada

1 201/689-7803 outside the US

A replay is available by dialing:

1 877/660-6853 in the US and Canada

1 201/612-7415 outside the US

Account #: 2147

Conference #: 104880

Forrester's GigaWorld IT Forum is taking place May 17-20, 2004, at the JW Marriott Orlando Grande Lakes in Orlando, Fla. More than 120 sessions will address a wide range of topics to help IT and business executives understand future business and technology trends to make informed IT decisions. More information is available at http://www.forrester.com/Events/Overview/0,5158,578,00.html.> About Forrester

Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Business, marketing, and IT professionals worldwide collaborate with Forrester to align their technology investments with their business goals. Forrester offers products and services in four major areas: Research, Data, Consulting, and Community. Established in 1983, Forrester is headquartered in Cambridge, Mass. For additional information, visit www.forrester.com.