The global market for offshored IT services and business processes has nearly tripled since 2001. However, a study finds that service providers have so far captured only 10 percent of a $300 billion opportunity. Over the next five years, the market will grow by an additional $80 billion.

Our study, which includes a comprehensive analysis of the addressable market for offshoring, also highlights ways in which this market may yet evolve.¹ It found that the drivers of future growth are likely to shift somewhat in IT-outsourcing services but will remain largely the same in business processes. Despite a significant slowdown in IT spending, the global offshoring market for IT services has grown by 21 percent a year since 2001. To date, this growth has come largely from applications development and maintenance and from R&D services—segments where we estimate that offshoring has reached about 30 percent of its potential. In R&D, new growth opportunities are opening up in increasingly advanced services. The John F. Welch Technology Centre, in Bangalore, for example, is conducting R&D in technologies such as propulsion systems for aircraft engines and in this way contributing significantly to the design of GE's latest jet engine. Nevertheless, our analysis...