Cost of on-shore outsourcing will increase in 2010

Real estate and staff costs to rise say analysts

Cost of outsourcing to increase over the next year

Clients of UK outsourcers may see the economic benefits of these services decrease as the economy improves according to a report from technology consultant Ovum.

Operating costs such as those associated with staff and real estate will increase over the next 12 months according to the report.

Causes will include more staff being employed on permanent contracts in-house, which could force outsourcers looking to retain their best staff to increase pay. This cost will be passed onto the clients.

Real estate will increase in value across outsourcing centres in North America, Europe and Australia – the increases in cost are again likely to be passed onto the client.

Lead analyst for Ovum Peter Ryan said: "onshoring centres in North America, Europe and Australia/New Zealand, are already seeing vacancy rates that are substantially higher than usual."

But there are still significant onshore opportunities for outsourcers according to the report, particularly in areas that have been hit by the recession - this will give opportunities to access large pools of talent as well as cheap real estate and government incentives.

There are other ways in which they can reduce costs; these include speech automation as well as staff home working.