India will be IT 'superpower' by 2006

India will match the US and Western Europe as an IT 'superpower' in the next three years as software development and offshore outsourcing continues apace, according to analyst group Gartner.

Speaking at a National Outsourcing Association seminar at the Indian High Commission in London, Adrian Quayle, VP of strategic sourcing at Gartner, said the competitive advantage gained by outsourcing parts of the IT infrastructure to India are now "unquestionable".

He said: "By 2004 European enterprises will consider offshore sourcing as one of the top strategic sourcing options and by 2006 the US and Western Europe will cease to be the only IT superpowers. The thing we are now starting to see is the Indian firms really beginning to move up the IT supply chain and looking to acquire US external service providers."

Financial services is the main sector to embrace offshore outsourcing, with the likes of HSBC and Standard Chartered relocating some IT services to the Indian subcontinent. Quayle said the public sector is also a big user of offshoring, although it faces wider political issues related to relocating UK jobs abroad.

He said: "Clearly there will be the political challenge and we can expect it will be a much tighter discussion than just outsourcing to IBM or EDS in the UK."

Quayle acknowledged that private sector firms will also face legal and public relations issues in handling any potential job losses that result from outsourcing to places like India.

"Clearly there are some disadvantages. But communication is a key activity. Communicate as much as quick as you can," he said.

Although India is currently the top choice of location for offshore outsourcing, Gartner believes it still has to address internal infrastructure and political stability issues to avoid losing out to other countries which are catching up fast.

Ireland is India's main competitor, closely followed by South Africa and Israel. And while China is keen to promote itself as an offshore location, it is still rated as "poor" by Gartner on infrastructure, language and cultural differences, and data security.

Martin Roxburgh, co-founder of the NOA, warned that companies need to think strategically and in line with wider business process change when looking at offshore outsourcing and avoid short-term tactical decisions that have a higher risk of failure.