The tendency for UK businesses to offshore their IT to India, is still going strong, according to a report by sourcing advisory firm EquaTerra.
Of the 110 UK companies surveyed, 57 per cent using near or offshoring, an increase from 47 per cent last year. All those what are offshoring are using India as one of their outsourcing locations.
It also showed that more than half of businesses intended to increase their use of outsourcing, while only nine per cent intend to reduce their outsourcing use.
The study indicated that a reason for this trend could be that Indian companies were increasing their profile and popularity, as well as the fact that there was a strong degree of customer satisfaction compared to US or European service providers. Four of the top five service providers ranked by client satisfaction were Indian companies.
The findings also showed that UK outsourcing service providers needed to be wary. "The Indian providers aren't just cheap, they are good as well." according to Malcolm Swallow, UK director of EquaTerra Europe. "I think it's easy for UK providers to dismiss them, but I think they do so at their peril.
"I believe that Indian providers don't have any baggage, are more fleet of foot, and their structure allows them to respond more quickly to customer requirements. They are perceived as being more flexible in their approach. You talk to TCS or Wipro and you'll get three guys who make a decision. If I have the same conversation with IBM they'll turn up with five lawyers.
"I think the UK providers generally recognise this and they are considering what they have to do to become more flexible and adaptable. It's a key aspect of what people are now looking for in outsourcing agreements."
Swallow argued that many UK outsourcing providers were biding their time, waiting for Indian providers to move into Europe and struggle to cope: "The bulk of [Indian] activity is around applications development. It's a lot easier to be flexible in this environment because it [simply requires companies to] buy more bodies. However, if you bought someone's IP estate, it's a lot more difficult."
"For infrastructure deals their ability to adapt and evolve might be limited. Many of the full service providers are relying on that to bring them down to their level. I think that they should be focusing inwardly as much as on their competitors. Relying on your competitors to fail is a pretty poor business strategy."
China is often described as being a major player in global outsourcing but only five per cent of IT organisations have a presence there: "It depends on how you see it. China as a market is huge with more than a billion people and it would be a good idea to outsource to China because it gives a footprint and a presence. But if you see it as a place for cheap labour then the difficulties in engaging or establishing yourself in those markets outweigh the benefits," said Swallow.
"Having said that quite a few of the Indian companies are offshoring their work to China and I think that's a trend we might see developing."
Swallow is not alone in his predictions. This week the National Outsourcing Association predicted that 2008 would see companies looking beyond India for offshore provision.
