Skills development and the ability to innovate and deliver added-value projects will be key to the UK maintaining its position as a global leader in IT services, according to a recent BCS Thought Leadership Debate.
The UK needs a knowledge-based economy because its manufacturing base is declining, and it must survive on highly skilled, knowledge-based professional work, the debate heard. However, knowledge work not only dominates the activities of developed countries but also emerging economies such as China and India. Competition is strong.
Given that wage levels in China and India are relatively low and Chinese and Indian companies can undercut UK costs, it is not surprising that the trend to offshore IT services is growing.
Most of the services provided by these countries are still relatively low grade, the debate heard, but with time, India and China will move up the value chain. The Japanese car and Taiwanese electronics industries both began by manufacturing entry-level products but have moved on to becoming brand leaders.
"The UK cannot expect to have an advantage over other countries through education and intelligence," said one delegate. "Indian workers are already just as educated as the UK's and the sheer size of India's investment in education is concerning."
Another factor in India's and China's favour is that wealthier countries tend to be more risk-averse, reducing their involvement in high-risk innovation. The diversity of the European Union and its member states' regulations tends to make potential markets smaller and raise the cost of development work, as applications need to be adapted to different markets, delegates were told.
The UK is, however, in a strong position, having the seventh largest economy in the world, a healthy surplus of trade and high exports. The UK excels in IT services, according to one delegate, because proximity to customers still matters.
Many important client firms for business services are located in the UK. Proximity is important because there are some services, such as strategy consulting, that require face-to-face contact.
The UK also has the advantage of a highly mobile workforce. Furthermore, IT professionals are migrating to the UK, helping support the industry.
A widely shared view was that the UK must appreciate that offshoring is happening and embrace it, work on its relations with China and India and not put up barriers. UK firms should be encouraged to globalise.
The UK must identify what it does well and what is sustainable, and build upon those activities. UK plc must use its engagement with customers to learn and innovate, making the most of new opportunities. The ability to innovate is key for UK sustainability, said debate participants. The UK tends to be good at research and development work and should profit from this.
One opportunity lies in added-value projects that are less well defined - tightly defined projects can be more easily commoditised, hence they are suitable for outsourcing, the debate heard
However, competitive advantage does not come from technology but people - their experience and skills. Education, training and qualifications could contribute to the UK's sustainability by promoting certain key subjects.
The UK's IT industry can also promote itself as one that protects its customers' trade knowledge, benefiting from some companies' reluctance to offshore because of concerns about compromising intellectual property.
The government has a role to play in sustaining the UK's advantage, by promoting professionalism, creating the right environ- ment for the IT service industry, and supporting education and professional standards, the debate concluded.
The BCS Thought Leadership Debates invite up to 40 influential people who are relevant to the subject under discussion, and aim to have a mixture of delegates from different backgrounds and organisations.