What happens when UK business has outsourced all its IT? Simon Moores predicts we will become a nation of civil servants and warehouse workers.
IBM, the world’s largest provider of computer services, has warned that millions of jobs will be lost in America’s high-technology sector over the next decade as companies shift jobs to low-cost markets such as India.
Oracle is to increase the number of software development and customer service staff it has in India from 3,000 to more than 6,000, according to company chairman Larry Ellison, and Advanced Micro Devices (AMD) is outsourcing most of its IT infrastructure management - including maintenance and support of global IT applications - to Delhi.
Meanwhile, closer to home, investment bank Goldman Sachs has become the latest blue-chip company to move part of its IT operations to India to reduce costs and even my supermarket, Tesco, has announced plans to establish an IT centre in India in a move will involve the transfer of 350 IT roles from the UK
I know I bang on about the dangers of outsourcing from a domestic industry perspective, but in the search for lower labour costs our larger companies are on a path which could, irrevocably, damage the UK as a competitive service economy.
Research company IDC predicts some political backlash in developed countries to the idea of "exporting jobs", and expects legislation to be introduced in many jurisdictions that will try to halt this movement.
It also believes that in a global economy, businesses will find ways around these restrictions and warns that Bangalore, India's primary IT hub, may no longer offer the world's best IT outsourcing value, that its infrastructure is saturated and that wages for skilled workers are inflated. All of which is rather good news for Iran, China, Russia and any other country with information society ambitions.
Last month, I read a report that one in four UK contractors are looking for work or are "resting". I spoke to one skilled Lotus Notes consultant on Friday who hasn’t found a job in months and commented that the market appears to have dried up.
I’m writing this from my home in Kent and a bicycle ride away the harvest is being taken in by young men in leather jackets. They could be from anywhere and, invariably, they are, but what they have in common is that they are cheap labour, much cheaper than I was, when I used to pick strawberries and potatoes to earn money in my school holidays.
Cost is, of course, everything when a farmer has to meet the pricing demands of a supermarket chain, and it’s the same for a big business trying to satisfy the expectations of its shareholders. The problem, however, is that this represents a law of diminishing returns.
When you’ve outsourced everything, then what? Britain has little or no manufacturing sector left, the demand for burger flippers at McDonald's is declining and only the public sector is expanding - and it produces nothing but cost and higher taxes.
Ten years from now, with most companies having outsourced all they can by 2006, what will the UK IT industry look like and where will people in IT work outside of marketing functions, when development, support and call centres are scattered across the world? What will the real benefit to our economy be, or will we simply be a nation of civil servants and warehouse workers?
What do you think?
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Setting the world to rights with the collected thoughts and opinions of leading industry analyst Dr Simon Moores of Zentelligence.
Acting globally, Zentelligence (Research) advises governments, suppliers, business and the media on the evolution, application and delivery of leading-edge technologies and specialises in the areas of eGovernment and information security.
For further information on Zentelligence and its research, presentation and analyst services visit www.zentelligence.com