by Mark Kobayashi-Hillary

With the trend to offshore IT services forecast to accelerate, the UK’s IT industry needs to take action to retain its position on the global stage. By focusing on what UK PLC is good at the industry has the ability to go on from strength to strength. In a series of articles to accompany the new BCS offshoring report we take a closer look at the phenomenon that is offshoring and how UK PLC is fighting back and using increasing globalization to its advantage.Mark Kobayashi-Hillary looks at Offshore Outsourcing, and the Global Opportunities that it brings.

We now collect our own groceries from the shelves where my parents had shop assistants to do it for them. Our own private cars have replaced delivery vans. Furniture makers persuaded us that it is clever to assemble our own kitchens. Banks long ago worked out that if they could persuade customers to fill in their own deposit slips they, the banks not the customers, would save millions. Now we also draw out our own money from their holes in the wall and call it our convenience.

Charles Handy - ‘The Age of Unreason’

Outsourcing is often misunderstood. Not only do some people within the IT industry find it a threatening term, there are all kinds of new and ever-changing jargon associated with the practice - which should have endeared the practice to IT professionals.

‘Outsourcing’ is the term commonly used for the practice of companies to subcontract work to third party organizations.

Outsourcing is a common practice and allows an organization to focus on their ‘core’ activities, leaving other tasks to providers that can supply service at a lower cost or better quality in much the same way as you might outsource the maintenance of your car to a garage or your blocked toilet to a plumber. In the latter case, you might not even question the cost.

‘Offshore Outsourcing’ is generally the same business arrangement as outsourcing, though the service delivery is performed from a remote location. Software development by a specialist company in India is a good example of this. ‘Offshoring’ is a similar, but sometimes confusing, term as this refers to an arrangement where the service is performed within the company itself, but at an offshore location - so no third party is involved.

The most controversial flavour of this strategy - offshoring - is really nothing new, even in services. Manufacturers have long used offshore locations to produce clothes, toys and many other products.

For many years, companies have made use of subcontractors to provide everything from canteens or cleaning services to data processing and consultancy. The EDS group was providing outsourced IT services to Frito-Lay in the 1960s.

What has changed in the past decade though is the birth of the Internet and improving global telecommunications. With prices dropping fast toward zero, it is becoming possible to use IT to outsource some company functions to partner firms anywhere across the globe.

Some believe that offshoring creates a major issue for the future of the UK IT industry, reducing our ability to compete with cheap overseas labour; they feel that it presents more of a threat to domestic jobs than an opportunity.

There is an oft-cited vision of our future as heritage tour guides and hairdressers. However, it is worth remembering that the 59m people of the UK still support an IT industry employing ten times those employed in IT in India, with a population exceeding 1bn. Our IT service exports exceed what we may buy from those countries that are perceived as a ‘threat’.

Far from killing our industry, this global activity is stimulating it. According to e-skills, the government skills body focused on IT and technology services, employment in the UK IT industry is forecast to grow at five to eight times the average employment growth in the UK over the next decade.

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