How will UK government solve its IT offshoring dilemma?

Perhaps the biggest challenge the government faces in cutting IT costs, is its dilemma when it comes to offshoring IT. Clearly high service levels and low costs can be achieved, for instance, by using Indian service providers, but at the cost of UK jobs.

Government CIO John Suffolk has been at the annual Nasscom event in Mumbai this week where, according to a report on India website CXOtoday , he said Indian service providers have been important in providing UK public services. But he did suggest that smaller contracts were the way forward.

In February last year spokesman for the All Party Parliamentary Group (APPG) on UK-India trade and investment relations told me: “With the economic downturn companies are trying to make cost savings and this is a way of seeing what role Indian IT companies can play in this. It will also look at how public sector procurement can be improved.”

The first Indian group of Indian companies that attended the APPG were IT companies.

So there is no question that Indian service providers do and will continue to play an important role in providing the UK government with IT. But how can this be done without putting experienced IT professionals in the UK on the dole?

There are hidden costs of offshoring for governments seeking the support of public opinion.

What is the best balance?

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I have worked on government IT projects in the past which used onshored Indian staff. From what I have seen, there is no saving for the government client, because the onshored staff are provided by one of the large consultancies which dominate government IT, and the consultancy charges the same grossly inflated daily rate for their staff, wherever they come from. Indeed, in many cases the consultancy will charge the government twice what it would cost the client to hire an experienced UK contractor directly to do the job. Instead, the consultancy pockets the enormous profit on this deal, with no savings for the government client, and in most cases the UK also loses tax revenues, because the onshored worker is paid a tax-free subsistence allowance while they are in the UK, and of course no UK tax is paid on their salary back in India. Meanwhile, UK-based IT staff often cannot compete for these jobs, even though we could do the job for a fraction of what the government pays its consultancy friends, because the jobs are rarely advertised, or they are advertised with such ludicrous combinations of skills that the consultancy can then claim there is a "skills shortage" and the only way to fill the post is to import one of their own staff. Of course, most of these onshored staff have less experience and often fewer skills than the UK-based IT workers who struggle in vain to find work in this virtually closed market. So if the government really wants to save money on its IT projects, it should get rid of the consultancies who currently enjoy such massive subsidies from the UK taxpayer, and instead start hiring skilled IT staff directly from the UK/EU market. But they'd better hurry, because if they carry on outsourcing/offshoring/onshoring, there won't be any UK-based IT industry left.

Thanks Matt

It is quite worrying that the government isn't even saving money by offshoring.

Yes the dwindling UK IT skills base is a worry because eventually there will be no choice other than offshoring.