Analyst firm Gartner predicts that the European market for offshore IT outsourcing will grow by more than 40% in 2003 and UK companies are lining up to take advantage of cheaper labour costs in countries, such as India and Vietnam.
Cheerleaders of offshore outsourcing argue that it is an economic no-brainer: move IT operations to regions of cheaper and highly-skilled labour and reduce costs significantly. But despite this hard logic there is mounting opposition to offshore outsourcing, which has become a political issue.
Unions have raised concerns about the impact of offshore outsourcing on UK jobs and threatened strike action if employers attempt to bulldoze through deals. To union leaders offshore outsourcing represents the unacceptable face of globalisation, giving companies an excuse to lay off staff and skimp on training.
Call centre staff might be bearing the brunt of job losses related to offshore outsourcing now but more senior IT jobs will be at risk over the next decade as suppliers provide more sophisticated services, union leaders warn.
There are also doubts over whether the cost savings touted by offshore outsourcing suppliers and consultants are achievable. Some industry experts argue that cost savings of 40%-60% may prove elusive, because of customer demand and the expense of managing a supplier at a distance.
There is room for compromise, however. IT directors and their boards could strive to limit job losses from offshore deals and make sure affected staff are re-trained and kept motivated. Staff could also be redeployed to manage the offshore suppliers and work on more high-level business and technology strategy. Equally, unions could work more closely with companies to develop best practice guidelines on offshore deals.
In the meantime IT decision makers and their staff are likely to be caught in the crossfire between the two sides. When the decision to move IT operations offshore is taken, usually by the finance department, IT directors will have to deal with the political fall-out.
Like it or not offshore outsourcing has a political dimension now, whatever the numbers tell you.
This was first published in June 2003