Half of the people in corporate IT departments manage and support infrastructure rather than develop and maintain applications, yet infrastructure represents only a tiny percentage of the IT labor offshored to low-cost locations so far. One reason is that managers have been hesitant to send such mission-critical operations too far from home. If an application-development project bogs down in Budapest or Bangalore, the roll out of a new feature may be delayed; if a server crashes or a network goes down, the business consequences can be far more serious. These concerns—as well as the cost and unreliability of telecommunications in some developing markets, the limited availability of key infrastructure skills there, and a history of locating hardware and labor at end-user sites—have made CIOs reluctant to pull the offshoring lever to reduce infrastructure costs.

In the past two years, however, constraints on the offshoring of infrastructure have started to ease, and the market appears poised to follow the growth trajectory of other IT-offshoring segments (Exhibit 1). Offshore vendors have started to invest aggressively both in infrastructure talent and redundant networks from the United States and Western Europe. From 2003 to 2005, the number of offshore vendors (the global talent pool...