The report supports claims that outsourcing is inhibiting the industry's ability to retain skilled staff, noting that "the increasing trend to outsource IT work mirrors the struggle NSW businesses face to recruit IT workers."

Titled "Getting a Grip on IT", the study on business attitudes to IT in NSW was conducted by the Sydney Chamber of Commerce and IT services and consultancy firm Unisys.

It notes a third of NSW businesses struggle to recruit IT staff, while over half (53 percent) outsource their work, up 33 percent from last year. SMEs are increasingly outsourcing their IT needs, which has previously been a concern of large enterprise.

The report found two-thirds of businesses use telecommuting, up 36 percent on last year and 60 percent on 2004.

Chamber CEO Margy Osmond said the increased use of e-mail, combined with telecommuting, has extended employee work hours.