Worldwide Market for Offshore IT Services Is Booming, as Indian Vendors Begin To Threaten the Market Share of Top Global Players, IDC Finds

FRAMINGHAM, MA – AUGUST 15, 2006 – According to a recent IDC study, the global and U.S. markets for offshore IT services continue to grow at a remarkable rate, driven primarily by U.S. customer demand. IDC predicts that offshore IT services vendors will capture $29.4 billion in worldwide customer spending by 2010, with little sign of a market slowdown. The study also reveals a shift in the strategies of the major offshore vendors, with an increased focus on service offerings that build more operational and strategic relationships with their clients. The evolving and increasingly competitive landscape will require vendors to make significant investments in order to increase growth and achieve differentiation.

"Offshore vendors are aggressively pursuing outsourcing deals that go far beyond the application maintenance engagements that built the industry to what it is today," said Barry Rubenstein, program manager for Application Outsourcing and Offshore Services at IDC. "By continuing to appeal to the customer need for low-cost labor, while simultaneously offering services that truly add value by helping customers increase revenue, ensure compliance, and become more responsive to changing business conditions, offshore vendors are continuing on an impressive trajectory."

The study finds that the largest offshore vendors have begun to pose a serious threat to the top global players, as they strengthen their onshore presence, develop relationships higher up in the food chain within customer organizations, utilize new technologies, and invest in developing hosting infrastructures.

Rubenstein adds, "With continued investments in remote infrastructure management, onshore datacenters, and tools to automate application development and maintenance processes, several of the large offshore vendors are posing a serious threat to incumbent global providers. To be sure, problems still remain, particularly employee productivity and the attendant revenue per headcount, as well as a lack of onshore consulting presence, but overall the market for offshore IT services is quite robust."

The study cites additional vendor actions that have contributed to their impressive growth:

— Signing larger contracts

— Expanding delivery capabilities beyond India and into China, Central and Eastern Europe, and Latin America

— Signing strategic partnerships with technology providers such as SAP and Microsoft

— Offering new services such as software testing

The study, Worldwide and U.S. Offshore IT Services 2006-2010 Forecast (IDC #202411), presents IDC's predictions and assumptions relating to market forces impacting the offshore IT services market for 2006-2010. The study segments the offshore IT services markets by geography, foundation market, along with the importing and exporting region. Also provided is a future outlook on the impacts of market developments for offshore players, and essential guidance for future success.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. Over 850 IDC analysts in 50 countries provide global, regional, and local expertise on technology and industry opportunities and trends. For more than 42 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com .

IDC Barry Rubenstein, 508-988-7882 brubenstein@idc.com or Jared Berezin, 508-988-6882 jberezin@idc.com

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