Discrete Manufacturing and Financial Services Spur Double-Digit Growth in Offshore IT Services, Reports IDC

Business Wire, Sept 15, 2005

FRAMINGHAM, Mass. -- The U.S. offshore IT services market is expected to nearly double in size to an estimated $14.7 billion by 2009, reports IDC. This represents a five-year compound annual growth rate (CAGR) of 14.4%. Discrete manufacturers will continue to generate the largest percentage of overall revenue for offshore services providers, accounting for 17% of spending by 2009. Retail, communications, banking, insurance, and other financial services companies are also expected to be prominent users of offshore IT services. In aggregate, the financial services industry is expected to account for 28.9% of the total spend by the end of the forecast period. A handful of industries will also present attractive, above average growth opportunities for offshore IT services. These will include healthcare, process manufacturing, professional services, and transportation.

IDC gained an understanding of the strategic drivers influencing offshore IT services adoption within different industries by surveying 1,000 end users in the U.S. Not surprisingly, cost savings remains the leading driver for adoption for all types of offshore services. However, nearly half those surveyed also leverage offshore capabilities to support new service and technology delivery models within their organizations. In general, discrete manufacturers and healthcare respondents viewed offshore services as an important cost-cutting mechanism, with the majority of discrete manufacturers also citing offshore services as an increasingly strategic component of IT delivery. As for the financial services industry, Jason Spaulding, research analyst, Vertical Industry Research at IDC noted, "These firms are at the vanguard of offshore services work. Companies in these industries are dominated by core legacy applications environments, strict competitive pressure to reduce costs, and consolidation. As a result, firms look to inexpensively integrate and manage current applications while developing new custom applications."

Perhaps most telling in regards to the future outlook for the offshore services market is the fact that 75% of respondents indicated that industry expertise plays an important role in providing offshore services. "Given this fact, understanding the key business drivers, inhibitors, and the degree to which industries will or will not procure offshore services is critical to capturing services opportunities," Spaulding advised. Furthermore, providers of all types should look to target industries while striving to enhance the depth of their current vertical market offerings and selectively targeting new industries for expansion."

IDC's U.S. Offshore IT Services Market 2005-2009 Forecast by Vertical Market (IDC #33754) examines the U.S. offshore IT services market with a focus on identifying vertical market opportunities. In the study, 16 vertical markets are analyzed, providing market size and growth over the five-year forecast period, a discussion of current trends, and an indication of which trends will drive outsourcing services adoption in the future, for each. Offshore providers encompassed within the scope of the study include Cognizant, Convansys, HCL Technologies, ICICI, Igate, Infosys, Wipro, Satyam, Syntel, and Tata Consulting Service.

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