Offshore outsourcing threat hyped, say European firms

6 Sep 2004

The practice of offshore outsourcing of major business and IT operations to lower-cost operations such as India and China that has ravaged the US business world has only succeeded in hitting the headlines rather than the wallets of Western European businesses, a survey by tech analyst IDC has revealed.

The study of 500 medium and large organisations in Western Europe suggests that although the offshore outsourcing model has captured the imagination, it has not yet managed to be translated into the wholesale transformation of the IT industry that has been predicted in public commentary.

In fact, says IDC, only 10pc of European organisations are using offshore as a delivery model for IT services.

The survey further shows that 80pc of organisations would not offshore their services as a service delivery model, even for services that are considered core for the offshore value proposition such as application development and application management.

The results show that European organisations would prepare access to offshore resources through their existing services provider rather than engaging with an offshore outsourcing specialist firm or by establishing their own offshore facilities.

“The fact that only 10pc of organisations are using offshore for service delivery, and that an astounding 80pc said that they would not consider offshore, clearly indicates that offshore outsourcing has managed to grab a lot more headlines than share of wallet,” said Marianne Kolding, research director of European Services at IDC.

“The fact that organisations so clearly stated a preference for gaining access to offshore resources through their existing service providers rather than offshore specialists could spell a tough competitive situation for, for example, the Indian offshore service firms, unless they quickly manage to establish their brands and a critical installed base in Western Europe,” she concluded.

By John Kennedy