To understand demand for offshore services, Forrester Research, Inc. (Nasdaq: FORR) interviewed 145 senior decision-makers at North American firms and discussed their IT services spending and offshore plans. According to the new report, “Unlocking The Savings In Offshore,” one-third of respondents use offshore providers. Eighty-eight percent of that group rated offshore provider’s value for the money somewhat or much better than US counterparts like Accenture, EDS, IBM, or KPMG/BearingPoint. While those already involved with offshore providers plan to spend more money in the future, a lack of project management skills continues to hinder offshore initiatives.

“In addition to value, respondents rated their offshore provider somewhat or much better than US firms 71 percent and 67 percent of the time, respectively, in quality of deliverable and timeliness,” said John C. McCarthy, group director at Forrester. “While reduced labor costs associated with offshore services remains a draw, veterans are already realizing the longer-term cost benefits that come through increased application productivity and process improvements that is delivered by the offshore providers. Through their adherence to strict IT development processes, offshore firms like TCS, Infosys, and Wipro have set themselves apart from the traditional IT service providers.”

Although they see the benefits of going offshore, experienced customers nonetheless have a real challenge in managing remote providers. Eighteen percent of respondents using offshore providers reported a major challenge in measuring performance, while 20 percent have serious issues specifying the work needed to be done. Twenty-two percent also reported a challenge posed by cultural differences between offshore and US staff members.

To help overcome these challenges, “Unlocking The Savings In Offshore” analyzes the best practices for managing offshore providers. It outlines the management teams that must be in place, as well as the ongoing attention needed in areas like negotiation, knowledge transfer, and project oversight.