Gartner predicts worldwide offshore spending will reach US$50 billion by 2007. Despite anti-outsourcing trends on a political platform, outsourcing IT offshore has become a fact of life, growing quickly and looking likely to hit virtually all enterprises in the coming years. Why this is so? Offshoring can provide huge benefits in terms of productivity, prices, profits and IT staffing flexibility by enabling an expanding base of world-class IT skills to be accessed. What is more is the 40% - 60% cost savings are simply too compelling allowing, as they do, the adjustment of shrinking margins with an increased bottom line, an irresistible combination in today’s highly competitive world. The future for outsourcing looks ever brighter.

India remains the leading offshore destination by a wide margin, particularly for U.S. and U.K. companies. "Every year, the risks of moving work to India get lower," says Dean Davison, VP of strategic outsourcing for Nautilus Advisors. "India is increasingly more adept at IP protection, providing resilient infrastructure and managing global relationships effectively."

Today, less than 10 percent of American companies outsource to more than one country but "most are evaluating multiple locations," says Davison. China, for example. Experts say it could be a powerful rival to India in the next three to five years, even though it currently can’t match India’s large English-speaking workforce, its level of compliance with international law or its number of IT grads.

Earlier this year, consultancy A.T. Kearney identified the most desirable outsourcing destinations. Countries were ranked by financial attractiveness, based on such measures as compensation and infrastructure costs, a so-called people score, measuring a nation's people skills, availability of language and educational skills, and the size and quality of the IT industry and their economic/political environment, infrastructure quality, cultural exposure, and IP security. India ranked first in the top 50 global outsourcing locations, followed by China and Malaysia in the 2nd and 3rd ranks respectively.

While India has been ranked leading destination, the various reasons other offshore outsourcing destinations are weaker are:

China IT service companies are small and inexperienced in global business and enterprise IT. Project managers and senior-level talent resources are scarce. Poor English skills. Data and IP protection continues to be an issue. Used mainly for low-end application development, maintenance, testing. Rising wages may dilute attractiveness.

Malaysia Lacks critical mass to be a top IT services location. Low service maturity and small labor pool.

Philippines Continued political instability and infrastructure weaknesses. Low IT process maturity. CMM, Six Sigma and other process certifications not followed until recently.

Vietnam High risk of IP loss and infrastructure outages. Entire country operates on 60MB of bandwidth. Inadequate non-IT infrastructure (roads, power grid, airports, real estate development). Most companies can offer only small-scale back-office functions. Low number of English speakers and senior IT managers.

Eastern & Central European countries Wages and other costs on uptick. Poor English skills and infrastructure. Weak IT infrastructure. Most companies are small—15 to 20 people, small workforce. IP protection a problem, although piracy rate has decreased recently. English not widespread. Political stability questionable.

Overwhelmingly, the Indian information technology and related services industry is predicted to become a $100 billion plus industry by 2011, growing at a compound annual growth rate of 18%, states an IDC report.

Moreover, the domestic IT/BPO, with revenues growing at 19.7% CAGR, is projected to touch $38 billion in 2011. This also means that domestic IT/BPO revenues will grow faster than the export revenues over the coming years.