IT heads to eastern Europe

The leading Indian IT service companies are preparing to set up operations in the new low-cost 'nearshore' locations of Central and Eastern Europe as businesses look beyond India for offshoring.

At an industry event hosted by LogicaCMG in Prague last week a spokeswoman for a Czech government-backed investment body, Czech Invest, told ZDNet UK sister site silicon.com that two of the big Indian firms are currently in negotiations to locate new facilities there.

She declined to name the companies until the deals have been finalised.

Prague's competitiveness has been hit by a rise in property prices, which are as high as €19 per square metre a month but IT salaries are still low, with average monthly wage around €570. This has led to other Czech cities such as Brno challenging for foreign investment.

Satyam, India's fourth largest IT services company, is also set to launch its new European hub in Hungary early next month, which will support both its European and global customers.

Eastern Europe and the new EU countries are pushing to be taken seriously as viable low-cost 'nearshore' alternatives for firms who do not want to move parts of their IT infrastructure as far away as India.

Analysts are also predicting the rise of countries such as the Ukraine as the first wave of nearshore countries such as the Czech Republic become more expensive.

Vladimir Kroa, programme manager of IT and business services at IDC, said: "Membership of the EU is very important in the [offshoring] decision-making criteria. People are also looking at the likes of Belarus as nearshore countries."