Gartner Says Economic Slowdown in the US to Accelerate Offshoring of IT Services

India Will Remain the Dominant Location for IT Offshore Services
for North American and European Buyers

Outsourcing Trends to be Discussed at Upcoming Gartner Outsourcing
& Vendor Management Summit, May 19-21 in Washington D.C
STAMFORD, Conn.--(Business Wire)--
The current U.S. economic slowdown will lead buyers of IT services
to consider increasing the percentage of their labor in offshore,
lower-cost locations, according to Gartner, Inc. India will remain the
dominant location for IT offshore services for North American and
European buyers as a result of its scale, quality of resources and
strong presence of local and traditional service providers.

With concerns that the US economic slowdown could extend to other
geographies, organizations are refocusing on IT cost reduction and
taking steps to accelerate the use of offshore labour. Buyers of IT
services will shift from cost containment goals to a greater focus on
cost reduction and productivity increases in their sourcing decisions.
This will lead to a steady increase in the adoption and expansion of
offshore services - primarily from India, but increasingly from other
countries as well.

"Factors that will give India the edge over other offshore
locations are scale and quality of labor. North American and European
buyers of IT services have been the force behind a growing offshore
services market and India is central to almost any discussion of
offshore services delivery for these buyers", said T J Singh, research
director, Gartner. "Whether it is the indigenous India-centric service
providers that have a wide-reaching impact on the IT services sector,
or a vast and growing IT labour pool being trained to support a global
client base, India will continue to be the most-sophisticated country
option to source offshore IT services in the near term."

Gartner sees two possible scenarios that will have an impact on
offshore services adoption in the coming months: temporary economic
downturn (best case scenario) or a more sustained recession (worst
case scenario).

According to Allie Young, vice president and distinguished
analyst, Gartner, "In the best case scenario, buyers will aggressively
seek cost-saving measures by accelerating offshore delivery or, for
first time users, moving IT services to offshore locations. For buyers
that haven't used offshore before, this will be a critical step to
changing their paradigm for services sourcing towards a global
delivery model (GDM) approach in the future. First -time buyers of
offshore services will seek providers that can prove effective in
transition and project management, skills that can demonstrate added
value from previous clients, and that are candid on the real costs of
offshoring. Buyers will be more aggressive with external service
providers (ESPs) to have greater clarity on costs, and they will seek
immediate savings."

In the worst case scenario, if a more sustained economic slowdown
leads to a prolonged recession in the US and possibly other global
economies, Gartner expects a more-aggressive movement to cut IT
budgets.

"Again, buyers will aggressively move toward offshore destinations
and service providers that can offer a global delivery model to access
lower-cost IT labor for routine IT work that must continue for the
business to operate. However, noncritical projects may be delayed
indefinitely, and for most organizations, any discretionary IT
spending will be cancelled", said Ms. Young. "Some variation by
vertical market will occur, but most will experience the overall
economic recession in some form, and IT will typically be impacted by
budget cuts of some form. The mix of offshore work will emphasize
routine maintenance and development work vs. higher-value service
contracts, and providers will need to work closely with clients to
deliver cost savings."

"Organizations are likely to conclude that increasing the
proportion of work to offshore locations is the best way to reduce
labor costs, among other benefits", said Arup Roy, senior research
analyst, Gartner. "In most sectors, the watchword is "caution" - IT
budgets have not yet been cut, and offshore services options are being
considered or accelerated as a prudent step to contain labor costs."

According to Gartner, while the recent appreciation of the Indian
rupee and rising wage rates have made some of the long-held benefits
of India's offshore services' cost competitiveness less predictable,
the more sophisticated providers have made critical process
investments, thus minimizing the impact of wage increases alone in
their final price of services to buyers.

Additional information can be found in the report "Offshoring IT
Services Can Cut Costs: Options for a Potential Economic Downturn"
which can be found on Gartner's Web site at
http://www.gartner.com/DisplayDocument?ref=g_search&id=652607&subref=
simplesearch.

(Due to its length, this URL may need to be copied/pasted into
your Internet browser's address field. Remove the extra space if one
exists.)

Gartner analysts will further discuss outsourcing trends at the
Gartner Outsourcing & Vendor Management Summit, taking place May 19-21
in Washington D.C. The Gartner Outsourcing & Vendor Management Summit
is the only event that provides a comprehensive view of the entire
outsourcing market -- infrastructure, application and business process
outsourcing, global delivery and the use of offshore providers, as
well as issues and trends about new delivery models, such as software
as a service. Many of the more than 50 content sessions will feature
case studies and panel discussions presented by end users and industry
professionals. For complete event details please visit the Gartner
Outsourcing & Vendor Management Summit Web site
www.gartner.com/us/outsourcing.

Members of the media can register by contacting Christy Pettey at
christy.pettey@gartner.com.

About Gartner

Gartner, Inc. (NYSE:IT) is the world's leading information
technology research and advisory company. Gartner delivers the
technology-related insight necessary for its clients to make the right
decisions, every day. From CIOs and senior IT leaders in corporations
and government agencies, to business leaders in high-tech and telecom
enterprises and professional services firms, to technology investors,
Gartner is the indispensable partner to 60,000 clients in 10,000
distinct organizations. Through the resources of Gartner Research,
Gartner Executive Programs, Gartner Consulting and Gartner Events,
Gartner works with every client to research, analyze and interpret the
business of IT within the context of their individual role. Founded in
1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and
has 4,000 associates, including 1,200 research analysts and
consultants in 75 countries. For more information, visit
www.gartner.com.

Gartner
Christy Pettey, (408) 468-8312
christy.pettey@gartner.com

Copyright Business Wire 2008