Offshore outsourcing refers to services that a client company contracts from a vendor located abroad. These services often include labor, infrastructure or capital. More often in the last three to five years, offshore outsourcing refers to the information technology work performed for American companies by overseas Information Technology (IT) companies. What began over a decade ago as a cost-effective means to supplement overworked application developers has become a trend that dramatically affects the entire American IT workforce. Some say this trend will have a lasting affect on the American economy as a whole. .
The main reason many companies are now turning to overseas IT providers is profitability. IT work can be contracted to offshore companies cheaper than paying an IT staff. The practice began with the development of India's technology universities and training infrastructure. The programming skills needed are now readily available in many countries including China, Russia and the Philippines. Labor rates and related personnel costs in these countries are significantly lower than in the United States. A company can hire well-trained, professionally educated IT workers from India at a significant savings over hiring American IT workers. Companies across America are cutting American IT jobs and choosing offshore outsourcing to supply their IT support including programming, maintenance and program development. Forrester Research predicts that the demand by American companies for offshore IT work will exceed India's supply in just a few years, allowing the markets of Russia, China and other countries to grow even faster. By 2005, Forrester predicts that over 1 million offshore IT workers will be employed in support of American business. According to a Dataquest survey, offshore vendors see their biggest growth opportunity in the coming year as application management.