Is offshoring government work the only way to meet spending review targets?

Analyst firm Ovum says the offshoring government IT and business processes will be an increasing trend as the government's spending review demands cost cuts of up to 40% in government departments.

The company says offshoring is the only way to meet the targets.

It also says that political hurdles to offshoring will be overcome in central government but local government will be different. The political hurdles to offshoring are the fact that the voting public are against jobs being sent overseas and also the high costs of transferring workers to service providers or making them redundant.

Sarah Burnett, Ovum senior analyst says, "The reality of the cuts is that government departments and suppliers will be left with little choice but to go for the cheapest options for service delivery and that will boost the push for off-shoring.

"Demand for off-shoring will grow firstly as a result of the government's negotiations with existing IT suppliers to deliver the same for less. Offshoring is one way for suppliers to deliver the requisite cuts in prices.

"Furthermore, the spectre of 25-40% reduction in spending will boost demand for business process outsourcing (BPO) among government departments.  When costs are the primary driver for change, BPO becomes an attractive proposition."

But Robert Morgan, director at consultancy Burnt-Oak Partners says that offshoring is "absolutely not the only way to meet the targets."

In fact he says it is one part and could contribute about 15% of the savings.

"The waste is within the old system and it can be consolidated.

"The removal of duplication across departments through shared services is an attractive option. You can take out 80% of costs if some back offices come together."

Another example of where massive savings could be made is in reducing the staffing levels within projects. "Departments always hire too many people up front for projects and often end up paying many for twiddling their thumbs," adds Morgan.

Morgan does however believe that infrastructure management could be carried out offshore remotely to save money.

He doubts applications can be offshored. "You cannot send applications to a country that does not have a solid data protection act."

Neither India or China have such acts.

Adam Rose, an outsourcing partner at law firm Berwin Leighton Paisner, says India has data protection laws but "not at the level of law equivalent to what we have in Europe."

He says this is a concern and you have to build in a set of contractual conditions.

But he says the problem can be overcome. "It puts more hurdles in the way but is not insurmountable."