Offshore outsourcers will be the winners as companies try to squeeze more value out of each IT dollar they spend.
Demand for offshore outsourcing services will continue to grow at a rate of 20 per cent per annum, according to Meta group which predicts offshore outsourcing will jump from a $US7 billion today to $10 billion by 2005.
A Gartner report released earlier this month said although companies are tapping offshore vendors primarily for application management purposes, demand is also emerging for business process outsourcing and infrastructure management services.
"There is a growing sense that IT infrastructure management is something that can be packed up in a box and shipped off to someone who can do it more efficiently and at a lower cost," Gartner analyst Bruce Caldwell said.
"People are looking to offshore as a low-cost and immediately available alternative to buying and deploying such technologies themselves."
Offshore IT provider Infosys believes the initial focus of BPO will be transaction processing and accounting services for clients in the financial services segment.
In September last year, the company made its first Asia-Pacific region investment, opening a 100-person R&D lab in Melbourne to develop business transformation solutions and services for growth industries for BPO such as telecommunications, financial services and utilities.
The company is confident the software centre will attract many more Australian customers to its existing base here, which includes Telstra, Suncorp Metway and Vodafone.
Infosys country manager for Australia and New Zealand Ananda Rao sees Australia as a cheaper R&D alternative to the US.
"Development costs in the US are definitely higher than here," he said.
Still in investment phase here but "anticipating growth", the company said it is in talks with the top three organisations in each industry sector, with a firm 15 companies exploring offshore services to outsource their IT and business requirements.
"Right now, we're about making the Australian market aware of [IT] alternatives," said Rao. "Corporations are trying to find out what they can get out of their IT investments. There's a certain amount of their IT budgets which goes to discretionary spending on things [like outsourcing]. Outsourcing spend could also grow among our clients because we're delivering."
Rao expects local revenues over the next three years to make up 5 per cent of Infosys' worldwide revenues, which were $US959 million in the quarter ending December 2002. The company said it is also eyeing the travel and tourism industries as new BPO markets.