The rising costs for UK firms providing and using Indian offshore IT services could drive organisations to cheaper locations such as Eastern Europe, according to analysts.
A report by Pierre Audoin Consultants reveals that Romania and other eastern European countries are virtually ignored by UK firms but are predominantly the first choice for the rest of Western Europe.
The report, Offshore 2003 Romania, claims that not only is the cost of using and providing IT services there much cheaper than India, but there is an abundance of well-educated and highly-skilled workers who also have a better understanding of western European culture.
Pete Foster, research director at PAC, told silicon.com that the UK's use of India is largely driven by historical and cultural links to the country, but firms may be forced to look elsewhere as skills and resources become more scarce and costs start to rise.
"There is great competition for cost and there is a view that India is getting more expensive. Europe represents a good opportunity and a new area to find resources. But it is virtually ignored by the UK," he said.
There is both the opportunity for service providers to improve their competitive edge by acquiring resources and companies in Romania more cheaply than India and for users to buy comparable levels of IT service at a much lower cost.
Foster said: "It is the area of choice for everyone else in Europe. From the business point of view it is quite backward compared to Western Europe and probably no better than the Indian and Asian alternatives. But it is arguably closer in cultural affinity. The language and education are good enough."
The report reveals that the mid-range price for offshore software development in Romania is around £100 per person per day and that the cost of employing a recently qualified graduate from an approved specialist university is approximately £4,100 a year. Experienced project managers can also be recruited for between £13,500 and £20,000 a year.
PAC estimates that in 2003 Romanian revenue from European countries will reach £78m, mostly from France, Germany, the UK and the Netherlands.