Offshore outsourcing to India will grow by at least 30 per cent during 2004 on the back of increased offshoring by bigwigs like IBM, EDS and Accenture, according to information technology research firm Giga.

"Offshore outsourcing to India will grow by minimum 30 per cent during 2004 as global outsourcing and consulting firms like IBM, EDS and Accenture will continue to increase their presence in India," Giga said in its 'IT trends 2004: Offshore outsourcing' report.

These companies will increase their presence in India to compete against the major Indian vendors, it said.

Using India as an offshore destination has quickly developed into an optimisation strategy rather than a pure cost containment initiative due to the quality and productivity benefits being realised, it added.

"India will continue to dominate as the preferred offshore country and Indian vendors will retain their leadership in the outsourcing marketplace," Giga said.

India will remain the best option for North American companies during 2004. But Indian vendors will continue to develop facilities in other low-cost nations like China and Eastern Europe, it said.

"India subscribes to the 'if you cannot beat them, join them' philosophy. Indian vendors realise that due to China's immense inexpensive labour pool and government support for software exports, China will be a strong force in the near future," the Giga report said.

India wants to control some part of this market before it becomes a threat to its dominance. In the short term, Indian vendors in China like Satyam and TCS will use these facilities to grow their Asia-Pacific business and provide service to the existing clients, Giga said.

Chinese language skills and remote management processes are not yet ready for the Western market, but they are well suited to support close neighbours like Japan.

Pointing out that it sees an increase in companies' intention to "quickly" outsource to low-cost geographies, it cited an example that several IT managers recently reported that they had been asked by executives to send one-third to one-half of all development and maintenance work to India during 2004.

This trend represents serious risk for companies that are not adequately prepared to do remote global outsourcing, Giga noted.