A study by neoIT - a Silicon Valley and Bangalore-based consulting group - has predicted that declining political opposition and heightening cost-cutting pressure will lead to up to 80% of the world's top 2,000 corporations having established substantial overseas outsourcing operations by the end of 2005 (see Global: 29 September 2004: FDI Recovery Under Way Globally, Focus Shifting to Services). 'We see acceptance for off-shoring as a foregone conclusion for multinational corporations,' the report stated. The offshore investment model is expected to capture smaller and medium-sized businesses in Western Europe, as well as in established markets like the US. Within the sector, neoIT anticipates that manufacturing, healthcare and retail firms will be among the fastest growing buyers of outsourcing services.

Among the other forecast trends, neoIT foresees China, Russia and a number of countries in eastern Europe and south-east Asia becoming increasingly influential players on the supply side. Industry consolidation is expected to result in heightened mergers and acquisition activity, as well as prospective stock-market listings by leading outsourcing firms.

Significance: However, the neoIT report cautions that despite the industry boom, companies will continue to face significant challenges to the execution of a successful offshore business outsourcing model. The consultancy estimates that, due to insufficient buyer preparation and management, over 40% of new offshore initiatives will not achieve their anticipated goals of savings, scale and risk diversification.