Mumbai: Indian organisations facing the challenge of an IT skills shortage and "second-class" treatment from local service providers must consider offshore outsourcing to obtain high-end IT services, says Gartner Inc.

"India is witnessing a severe shortage of skilled IT resources at all levels of the IT personnel chain," said Linda Cohen, vice president and distinguished analyst for Gartner''s IT sourcing group. Demand for skilled IT personnel by initiatives like the Indian government''s recent national e-governance programme (NEGP) and resource hungry Indian offshore service providers are outstripping local supply with rapid economic growth exacerbating the problem. Accordingly, local chief information officers (CIOs) are finding it difficult to manage the shortage of skilled local IT resources as internal business units become even more demanding in the area of IT requirements and schedules.

"Local service providers lack adequate focus on the Indian domestic market, widening the demand-supply gap by not allocating enough quality resources for Indian customers," said Cohen. "Service providers typically allocate the best resources to their global flagship customers that pay in dollars and yield better margins. This is particularly true with Indian service providers".

India is undergoing massive economic growth. GDP grew 9.2 per cent in fiscal year 2006, which was second only to China among the major economies of the world. A recent Gartner survey conducted among more than 1,400 CIOs worldwide showed that IT budgets in India had the highest growth of 16.19 per cent, compared with an average of 3.16 per cent in the rest of the world.

These challenges and market conditions require Indian CIOs to look beyond the limits of their own geographical boundaries, much like their Western counterparts. Gartner predicts Indian companies will increasing go offshore in their sourcing strategies, which will result in outsourcing deals offered by some Indian companies that include higher end parts of service (for example, design and architecture, and business consulting) delivered from other parts of the world.

"This global sourcing model will become business-as-usual for Indian organisations," said Arup Roy, senior research analyst for Gartner''s IT services market group. "Indian companies will increasingly source IT skills from nearby Singapore and Hong Kong. The market has already seen the first signs of this trend. For example, the Indian embassy outsourced its visa collection and delivery services to a U.S. company. Many Indian IT firms with operations spread across the U.S. and Europe are now outsourcing a part of their administrative work locally".

Gartner recommends Indian CIOs to:

• Develop innovative programs for retaining the talent they already have. Alternative sources of talent, such as recruiting from small and mid-tier cities, should be considered. Companies must invest heavily in training, even while knowing they will lose some of their training investment to competitors.
  
• Evaluate offshore outsourcing or staff augmentation from other parts of the world in their sourcing strategy. This will create a sense of competition among the local vendors, potentially increasing their focus on local opportunities.
  
• Consider Tier 2 and Tier 3-level Indian service providers for their key capabilities in various aspects of IT delivery. The right provider can provide domestic resources and perhaps a higher level of attention to issues and demands.