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European IT firms ramp up offshore workforce
Competition with US and India hotting up, says IDC

By Andy McCue

Published: Monday 15 May 2006

European IT services companies are quickly ramping up their offshore capabilities in a bid to compete with the big US players and home-grown rivals in cheaper locations such as India, according to new research from IDC.

European providers still have a lower share of their staff offshore than their US or Asian competitors but this is set to change with European companies increasing their offshore assets by 65 per cent during 2006.

IDC says this will put them in a stronger position to compete with major global players such as Accenture and IBM, as well as Indian outsourcers such as Infosys, Tata Consultancy Services and Wipro.

IDC also predicts the threshold for entry to using offshore outsourcing services will get lower. Cheaper labour now outweighs the increased management cost on projects worth as little as $50,000 to $100,000.

That will mean an increasing number of smaller and medium-sized businesses opting for offshore outsourcing, according to Mette Ahorlu, senior analyst at IDC's European services group.

He said in the IDC report: "Offshore will not continue to be an 'exotic' way to save money; it will soon be taken for granted by all customers. Use of offshore resources began as application development services but has expanded to all types of application services, infrastructure services and business process outsourcing."