UK IT and networking contractors are pricing themselves out of the market, as companies turn to India for cheaper in-demand skills.

Organisations under pressure to cut costs while maintaining critical software development programmes are hiring experienced Indian engineers rather than pay over the odds for British workers.

Indian IT professionals experienced in Java and Microsoft .Net offer their services for around £150 per day compared to £400 per day for UK contractors, or the £600-£1200 rates charged by UK consultancies.

Simon Denison-Smith, chair of the Computing Services & Software Association Offshore Forum, said: "Twelve months ago the main driver to go offshore was the shortage of UK skills.

"But with the fall of the dotcoms and the general downturn in the IT sector, companies are once again being forced to look at the bottom line."

Salaries for skilled IT staff are escalating, and Denison-Smith believes companies simply can't afford to pay these inflated wages.

Business software company The Lanner Group is one organisation that has turned its back on UK contractors and is using offshore specialist Rave Technologies.

Indeed, the company claims that it pioneered the offshore development model.

David Jones, marketing director at Lanner, said: "We started to work with Rave last year on web-based projects, because we needed fast access to the right skills. Cost is important, and we made savings of up to 30 per cent on each project."