5 reasons why government doesn't really want to reduce number of offshore IT workers in UK

The immigration cap has kicked in today. The IT industry as we know has mixed feelings about it.

I blog a lot about the government’s decision to leave out the controversial Intra Company Transfer (ICT) scheme, and the fact that UK IT professionals feel they are disadvantaged by it. So here is a blog post with some opinions on why the government left out ICTs from the cap.

1 – Professor Ilan Oshri at the Rotterdam School of Management who is also a Warwick Business School associate fellow says offshoring is a business reality and without it UK businesses would struggle to compete, which would harm the UK in the long run.

He says lower cost IT services are vital to UK businesses. “Many of these companies are competing with companies with much lower cost bases.” One vehicle to reduce costs is offshoring. It means fewer jobs in the UK but it improves competitiveness which is important in the long run.”

He says cost is not the only advantage. “By offshoring UK businesses have become far more nimble because they can scale up and down through suppliers’ offshore talent.”

He adds that ICTs are a vital ingredient in offshore projects. “Any outsourcing deal relies on staff from the supplier working closely with the client to transfer knowledge from the client to the supplier. This execution of deals is the reason why many offshore workers are in the UK.”

2 – Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, says the ICT is vital to support the transition and transformation of a deal. “Transition is a critical part of the of the offshoring process. For that reason offshore suppliers need to move staff to the UK.”

He says they also need to have staff that have worked closely in the customer environment. “These will then return offshore at some point to lead delivery teams.”

He also says if UK businesses are to take significant cost out of operations offshoring is an attractive option. “You will need to have offshore workers onshore in the UK but there is a debate about the size of this presence.”

3 – Jeff Smith, group CIO at Torus Insurance, says the business can focus on its core offering and call on offshore resources when required.

“We use offshore suppliers to make the innovation we come up with a reality. If we maintained the software development resources to deliver as fast as offshore suppliers we would be a software company with 90,000 staff. There is no point us doing what other people can do.”
Cognizant recently built a new portal for Torus. It took five months and used 50 to 60 developers at any one time. There were also about six business analysts and a couple of project managers. Smith says Torus would have spent ten times more money if it had done it in-house.

4 – Peter Brudenall, partner UK law firm Lawrence Graham says the reason that UK businesses will continue to demand services from offshore suppliers is because of the flexibility they offer as well as the cost advantage.

He says companies can cut costs if they can bring in staff on a project basis rather than having to have them as part of the permanent workforce. Indian companies for example have workers who sit on the bench, he adds. This bench is populated by workers who are brought in to do particular projects.

“Indian companies have a lot of bench strength with people ready to be deployed on short term projects. One month they could be in the US and the next month the UK.” This level of flexibility and low cost is not available onshore.

5 – Graeme Cross, head of business systems and development, at Morrison Utility Services told computer Weekly following a deal with Indian tier two supplier Zensar Technology that the company chose to offshore its software development for more than just to lower cost.

He says it also provides flexibility because it allows the company to flex up and down the number of developers it uses at any one time. He says it also gives the company access to skills because its in-house team did not have the cloud and mobile development skills it needed.

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