SMEs in the software and IT services sector are challenging gloomy economic projections, according to a survey from Intellect, the UK technology trade body. With 53% of respondents forecasting double-digit growth for 2008 compared to 49% that predicted double-digit growth last year, the mood among SMEs seems bullish, despite the global financial squeeze.

Outsourcing and offshoring are on the rise, says the report, but it appears that Asia is becoming less popular as a destination. The percentage of respondents outsourcing to Asia dropped to 44% from 55% in 2007. In contrast, both Western and Eastern Europe have seen an increase in R&D outsourcing.

Chris Barling, CEO of Actinic, a company profiled in the report said, “"We are currently saving about 40% in costs by developing overseas, mostly in Eastern Europe. We decided on Hungary because of the cost and quality benefit.”"

The survey, which contains case studies, as well as a variety of questions on performance, activity, pricing and development strategies, also shows that SMEs are embracing globalisation. In last year’'s survey, 59% of respondents identified globalisation as having a neutral or negative impact on their business. In 2007 respondents showed a marked turnaround in attitude, with 57% of respondents seeing globalisation as having a positive or very positive impact on their business. SMEs are today working on a global stage, identifying opportunities in the global market rather than focusing on home markets.

The Intellect survey, now in its second year asks software and IT services companies operating in the UK about their current and future performance. The SME software sector, in particular is an important contributor to the UK economy, and the survey aims to understand better the key challenges and opportunities of companies developing and selling software in the UK. The survey will be conducted annually to establish whether these findings are trends or blips, helping establish the most comprehensive overview of the SME software sector currently available.

Intellect is the UK trade association for the IT, telecoms and electronics industries. Its members account for over 80 percent of these markets and include blue-chip multinationals as well as early stage technology companies. These industries together generate around 10 percent of UK GDP and 15 percent of UK trade.