BPO to continue to boom despite setbacks

Despite some hitches, US businesses will continue to outsource work overseas as they do not have the internal resources to do the job themselves, analysts said.

"There could be some blips, but the long-term factors that favour outsourcing are still in place," Gartner analyst Frances Karamouzis told 'Information Week'.

Businesses have little choice but to continue to outsource IT work because they simply do not have the internal resources to meet their needs, she said.

"Some big companies are still operating with green-screen applications because they don't have the IT people or the skills to move off legacy systems," Karamouzis said, adding that much of the work that is outsourced will be placed offshore because of price considerations.

Alarms were raised in some quarters about outsourcing to India when it came to light that money was siphoned from Citibank accounts, but most analysts don't see an end to the offshore-outsourcing boom.

Karamouzis noted that the perpetrators in the case were quickly arrested and jailed by police. "It shows that India has modern, capable law enforcement," she said.

Adam Frisch, a UBS Securities analyst, also doesn't believe the outsourcing market is about to lose steam.

"We do not think the fundamentals of a growing and still-nascent industry change in a three-month period," Frisch said in a report.

He believed offshore IT services companies will continue to grow, particularly as they add new capabilities such as consulting and infrastructure management.