The European market for offshore outsourcing will grow by more than 40% in 2003, analyst firm Gartner said last week, as businesses attempt to reduce IT overheads by seeking skills abroad, typically in India and the Far East.
However, Peter Skyte, national secretary of the Amicus MSF trade union, said: “Our members have already demonstrated their willingness to take industrial action where there are not sufficient assurances and guarantees about job security. There is a need for jobs and skills to be retained within the UK. Companies that develop IT offshore without alternative investment in jobs and skills in the UK will be marked out as poor employers.”
Analyst firm Gartner believes offshore outsourcing is a “must do” for IT directors in 2003 and said it should become a standard strategy for European companies in the drive to reduce costs and maintain a high-quality service.
“Access to high-quality staff with key skills, lower costs and the ability to utilise 24x7 support services mean enterprises can continue to improve service levels while maintaining healthy margins,” said Ian Marriott, research director at Gartner.
In the UK, blue-chip companies such as Royal & Sun Alliance, Sainsbury’s, Asda and British Airways have signed offshore outsourcing deals. Recently, however, offshore outsourcing has become a contentious issue, with unions raising concerns about job losses in the UK.
Last year, insurance company Prudential was forced to water down plans to transfer its call centre operation to India in response to union concerns about the number of redundancies it would cause.
This was followed last month by protests from telecoms workers against BT’s plans to open two Indian call centres - in Bangalore and Delhi - employing 2,200 people by 2004.
When devising an offshore outsourcing strategy, Gartner advised companies to follow a three step-plan: consider the political stability of the country offering the service; the capability of the supplier; and whether to move the service to an offshore or near-shore location.
Analyst group Meta urged companies to resist the temptation to seek ever-cheaper locations for offshore outsourcing. In a briefing paper, Offshore Outsourcing: Beware the China Syndrome, Meta analyst Kip Martin said, “The perception is that Indian outsourcing providers have matured, and prices are going up.
“China has a large population, with a large pool of technology skills and low labour rates. So, the instinctive response is, why not just shift everything to China, and keep prices down?”
Meta advised users to adopt a broader cost-benefit analysis of both price and other factors affecting the probability of success.
“Instead of focusing on China, India, Vietnam, the Philippines, or any other specific outsourcing location, organisations should focus on the supplier,” Meta said.
“Competitive bidding should always include a mix of offshore providers, domestic providers with offshore delivery capabilities, and providers proposing domestic delivery.”