An average of 41 percent of new development activity is now outsourced, according to META Group, Inc. Last year, the average percentage of new development from outsourcing providers and external contractors was 35.9 percent worldwide. Despite political instabilities in India and other parts of the world, more and more companies realize the strategic and financial advantages to using offshore resources for both programming and business processes, according to new findings from META Group's upcoming 2004 Worldwide IT Benchmark Report, which looks at IT trends in various industries across the globe.

"IT budget cutbacks have left IT managers little choice but to outsource if they are to get their development projects completed," says META Group executive vice president Dr. Howard Rubin. "IT organizations often use external resources – such as consultants, contractors, packaged solutions, and outsourcing providers – to augment and sometimes replace internal resources. Going offshore and using the economics of offshore outsourcing have been the only competitive options left for larger companies since all the IT budget decreases of 2000, 2001, 2002 and even 2003."

There is a substantial increase in the use of outsourcing providers and external contractors for new development in both U.S. and non-U.S. companies. Offshore outsourcing is definitely up as offshore companies mature, providing cost-effective and high-quality services. These companies have found methods for mitigating risk and have compiled a substantial list of strong customer testimonials. India continues to be the preferred offshore country, with more than 500,000 knowledge workers, but other countries are competing – Russia, the Philippines, Ireland, Israel and China are the up-and-comers to watch.

Turnover rates for IT staff are decreasing both in the U.S. and worldwide. U.S. turnover is at 8.1 percent, down from 11.8 percent; worldwide turnover is at 8.2 percent, down from 11.7 percent last year – such rates are to be expected when hiring is down because those who have managed to hold on to their jobs do not quit when the job market is depressed. Not surprisingly, India, the preferred offshore outsourcing country, is also the country with the highest turnover rate; Canada has the lowest turnover rate.

"There is no doubt that 2003 has been a terrible year for IT workers," said Dr. Rubin. "Staff cutbacks and the unavailability of new positions have sent many IT professionals looking for new career options. However, there seems to be better news on the horizon for 2004 – we've noticed a recent increase in internal hiring, which could be an early sign of a slow economic recovery."

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