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However, 75% of companies have no plans to extend offshore outsourcing

The IT services market in Western Europe will grow by 4.8% in the next five years, reaching $249 billion in 2012, according to a report by industry watcher IDC.

The economic downturn could actually contribute to the sector’s growth as companies turn to outsourcing as a way to cut costs, says IDC. It also predicts the growth will be driven by the increased externalisation of custom application developments, together with a corporate desire for more predictable IT costs.

“Increasing access to cheap resources and customers’ need to modernise applications has revitalised the custom application development market,” the IDC report says, “leading customers to increasingly externalise their project instead of hiring contractors to work on internal ones.”

Meanwhile, three-quarters of IT departments have no plans to send IT work offshore over the coming year despite fears of a downturn, according to research by ReThink Recruitment.

The study found a further 6% of IT departments intend to bring offshore work back into the UK.

“Strong evidence is now emerging that the rationale behind offshore outsourcing is beginning to unravel as wage inflation in overseas IT centres erodes the cost savings, while quality control and data security concerns become more prominent,” the study said.

Managing director of ReThink, Michael Bennet says the research shows “offshoring is no longer a one-way street.”

“A lot of organisations saw offshoring purely as a way to cut costs, but spiralling wage inflation in offshore locations, combined with the project management cost of co-ordinating teams across international time zones, can eat into any cost savings,” he says.