Outsourcing: a level playing field?

The practice of outsourcing systems development to specialist IT companies has been around for a long time and is big business. For many companies, it makes...

The practice of outsourcing systems development to specialist IT companies has been around for a long time and is big business. For many companies, it makes sense to concentrate on what they actually do - insurance, banking, telecoms or whatever - and buy in expertise from other companies that specialise in providing IT solutions and services.

In recent years, the emergence of IT industries in developing countries, notably India, has seen new players enter the outsourcing market. Because of lower labour costs, relative to those of the Western nations, Indian providers have a significant advantage over their Western competitors. To redress the balance, many Western IT companies have set up systems development operations in India. And thus the terms 'outsourcing' and 'offshoring' have now become synonymous.

Offshoring has resulted in the loss of many British IT sector jobs, particularly during the recent economic downturn as companies seek to reduce their costs. It could be argued that jobs have been lost in many other sectors, and that IT workers are seeing the kind of changes in their industry that other workers have had to cope with over the years; many of which have happened, ironically, because of the introduction of computer systems. After all, business practices and technology are changing all the time; everybody needs to survive in a very competitive world. While this is so, the British IT sector is unjustly having to compete on uneven terms with the competition.

Indian and other outsourcing companies are granted work permits for their staff to work in their UK operations, provided that they meet the terms of the Intra Company Transfer (ICT) regulations, as determined by the Department for Work and Pensions (DWP). The regulations are intended to ensure that UK workers are not disadvantaged by non-EU staff bought in to work in the UK; they basically require that non-EU workers be paid the 'equivalent' of their local counterparts in terms of salary and allowances. However, the DWP definition of the allowances includes the cost of accommodation in the UK; this has provided a 'loophole' to exaggerate costs, for example using multiple occupancy of premises.

A recent edition of MacIntyre Investigates on BBC Radio 5 Live examined alleged abuses of the ICT regulations. The programme also mentioned the failure of the DWP to check these costs, citing a lack of resources. To date, no non-EU outsourcing company has been brought to book under the ICT regulations, but there seems little doubt that abuses are taking place and that local workers are losing jobs as a result.

Companies operating in the UK are rightly required to comply with employment regulations that give rights and protection to their employees; most people would broadly support this in a civilised society. Sadly, our values are not shared by some foreign companies, employed by UK concerns to perform work previously undertaken in the UK. Having made 140 local staff redundant on one of their UK accounts, a major Indian IT consultancy has recently dismissed 10% of its offshore Indian staff and at the same time imposed an extra hour's work each day, without pay, on those remaining. And all quite legally. Actions such as these would not be tolerated under UK employment legislation, but some well-known British companies are indirectly benefiting from the lack of fair employment rights overseas, again at the expense of British workers.

There is support in this country for the idea of fair trade in food imports from the third world to ourselves and we are prepared to pay a little more to ensure this; the Fairtrade label has become a household name. In a similar way, we abhor the labour conditions and low wages in some Far Eastern counties that supply clothing to our high street stores, and as a result, British retailers are taking notice, outlawing bad treatment of third world workers, having decided that an ethical approach is good business. However, the question of ethical practice in IT outsourcing has seldom been part of the argument.

We need to trade in a global market and must expect to compete with other nations for that trade. But competition needs to take place within a set of rules, on level terms. Bizarrely, we do not act when we ourselves are the losers.

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