Demand for offshore outsourcing will more than double over the next four years, rising from $7 billion to $17 billion.

An analysis by research company IDC also shows that businesses that have initially looked to outsource IT services to locations in India, the Philippines and China will increasingly start to consider central and eastern Europe from 2006 onwards.

Spending by US and European customers on offshore IT services will continue to be heavily concentrated on applications development, with the bulk of activity being focused on custom development, applications management and systems integration. But the market is progressively encroaching on aspects of IT that have traditionally been delivered locally, according to IDC analyst David Tapper. "These services range from application and infrastructure management to IT consulting," he said.

CIOs will increasingly look at onshore outsourcing as forming an integral part of their overall IT service delivery, he adds, creating considerable market opportunities for offshore players to expand into the domestic markets of their customers.