Is offshoring the answer?
- Martyn Hart
- On June 15, 2011
This week, we’ve seen outsourcing hitting the headlines again, as the Public & Commercial Services (PCS) union refused to rule out strike action over HP’s plans to offshore 200 jobs to India. The jobs in question are largely responsible for providing IT support to the Department for Work & Pensions (DWP), with talks over offshoring evidently at an ‘advanced’ stage. So what does this tell us? Can we expect a deluge of offshored public sector contracts? If so, is the general scepticism around offshoring justified?
Of course, the DWP is not the only place we’ve seen the question of public sector offshoring raised in recent weeks. We’ve also seen Birmingham City Council announce that up to 100 council ICT jobs are scheduled to be transferred to India through Capita, while the £600m BPO deal at the Personal Accounts Delivery Authority to outsource the administration of the National Employee Savings Trust (NEST) scheme may see as much as 60% of the work going abroad.
I suppose the first thing to say is that offshoring is nothing new, and we’ve seen plenty of examples of public sector and local government authorities offshoring successfully in the past. Last July, the Prime Minister even visited India with a firm promise that: “In terms of being open to [offshoring]… you will find Britain one of the most open and progressive countries.” So why has news of several recent public sector offshoring deals caused such a stir?
Clearly, there’s a fear that British jobs will be lost – despite the fact that HP has already given assurances that affected employees who are based at sites in Newcastle, Lytham St Annes and Sheffield will be relocated to other positions within the organisation. It seems that for many, the greatest worry is that in the race to make savings, we could see the burden of increased unemployment passed onto the taxpayer, as more and more low-paid jobs are sent abroad for the sake of making savings.
In my view, however, offshoring has a role to play – although it’s clear that it must be part of a bigger overall strategy. It’s no use relocating services to India or Sri Lanka on a short-term basis just to make a quick saving on costs. Organisations must examine their own core competencies and understand where they have a skills gap, and decide whether or not an offshore provider has both the right level of competency and the correct cultural fit to make a contract work in the long term. This is something that organisations might want to review even if they have offshored, because markets change both here and overseas.
I know this is a common refrain from me on these pages, but any contract entered into on the basis of cost alone is far less likely to succeed than one which has been carefully structured, and fits in as part of a broader, overall strategy. This is something that the unions who are protesting against these moves could try to understand – because if it benefits the way services are provided in the long run, then perhaps offshoring isn’t the great evil it’s being made out to be?
If you’d like to hear more about offshoring, the NOA will be running an Offshoring Day in September. For more information, please contact Stephanie Hamilton at email@example.com