As more IT projects are outsourced offshore, North American and Western European IT services vendors, to compete, must shift their domestic resource mix to meet three criteria: interact face to face more often, allow for competition based on business value instead of price and establish requirements for innovation and quality, according to Gartner Inc.

"Offerings that meet the criteria exploit the inherent problems with offshore services – namely communication within a global delivery model, and the vertical and business process expertise necessary to demonstrate business value," said Alex Soejarto, principal analyst for Gartner. "In order to compete effectively with offshore vendors, North American services companies need to re-evaluate their delivery methodologies to include larger components of a project that can be delivered off site."

The increasing use of offshore resources in IT is part of a larger, historic economic trend of moving work from countries with high labor rates to regions with lower labor rates. What is different about the adoption of offshore services, compared with prior economic trends, is the lightning speed at which offshore services have become a mainstream reality that will not disappear once the Western economies recover.

Therefore, Gartner analysts said it's crucial that IT services vendors have some sort of involvement with other offshore service vendors.

"The increasing adoption of offshore services creates both opportunities and challenges for IT services vendors," said Michele Cantara, principal analyst for Gartner. "If they haven't already, North American and Western European IT services vendors that are involved in large engagements of more than $1 million must establish an offshore partnering or acquisition strategy to compete more cost-effectively with offshore service vendors."

Additional information is available in the report "IT Services Vendors Cope With Offshore Services Revolution." This report examines how the market for IT professional services is being reshaped by the presence of offshore services vendors in the IT services value chain. This research can be purchased on Gartner's Web site at www.gartner.com/DisplayDocument?id=407048&ref=g_search.

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