Offshore outsourcing has not hit UK jobs, says ONS

Report comes as Indian IT company creates 600 jobs in Northern Ireland

Offshore outsourcing of IT and call centre roles to low-cost countries such as India has not hit UK jobs, according to the latest official employment statistics.

The ONS' latest Labour Market Trends figures show that employment growth in call centre related occupations in the UK has been nearly three times the overall growth in employment, while redundancy levels have also consistently fallen since 2001.

The employment data calculated by region is also in line with that growth trend and the ONS said this suggests offshoring has had minimal effect on the employment prospects of IT-enabled occupations across the UK.

The report said: "In other words, the UK is gaining from the increasing trend in trade of IT-enabled services - imports may have grown but exports have grown just as fast."

The report comes on the same day that Indian IT company HCL said it is to create 600 jobs at new call centres in Northern Ireland with the help of £4.68m in government grants.

The announcement was made by UK Prime Minister Tony Blair as his tour of India reached New Delhi.

HCL has based its 'nearshore' business process outsourcing (BPO) operations in Northern Ireland since 2001, when it acquired BT's Apollo call centre. Earlier this year HCL also acquired Answercall Direct in Portadown.

HCL said around 400 jobs will be created in Armagh, with the remainder split between there and Belfast depending on requirements.

Johnson`s all praise for outsourcing

UK Secretary for Trade and Industry Alan Johnson today said he strongly supported India’s outsourcing prowess and was against interventionist measures to stop it.

“Responding to globalisation by putting up barriers is short-sighted, ineffective and ultimately damaging for consumers, and particularly for business and industry,” Johnson said at a meeting organised by the CII.

He pointed out that outsourcing could and should bring benefits to both countries. “Whether it is UK firms outsourcing to India or vice versa, offshoring make companies more efficient and give them access to new markets. At the same time, it creates jobs and wealth for local communities,” he said.

Commerce and Industry Minister Kamal Nath said both countries felt that the India-UK Joint Economic and Trade Committee (JETCO), apart from being an institutional mechanism to review the status of bilateral trade, must also deliver results and should further Indo-UK partnership.

Johnson later called on Finance Minister P Chidambaram. He discussed banking and financial sector policies in India. Chidambaram pointed out that the policies in the banking and financial sectors allowed ample opportunity to foreign banks to grow in India, both organically and inorganically, according to official release.

Chidambaram also said developed and the G-8 countries needed to put pressure on oil producing countries to check the long term damage to world economy.

“Resources of developing nations are being diverted from achieving Millennium Development Goals to higher prices for oil,” Chidambaram said.

Blair allays India’s fears about outsourcing

The European Union on Wednesday sent a clear message that India would have to open up its economy for attracting FDI in core sectors to the tune of $150 billion, which Prime Minister Manmohan Singh has sought over a period of 10 years.

“The future clearly belongs to opening up of the economies. Globalisation is not a matter of debate, it is a reality,” British Prime Minister Tony Blair, who is also the President of the European Council told the India-EU Business Summit in New Delhi.

Blair allayed fears about outsourcing saying it was there to stay, as it helped economies of the developed countries.

Dismissing fears of loss of jobs in developed world due to outsourcing of business processes, Blair said outsourcing in fact helped in boosting the profits of local business houses.

Outsourcing rides out the storm

Despite recent offshoring project failures, it appears that finance directors seeking more efficiencies could still provide another major boost for the outsourcing industry.

Concerns were raised over the security breach at an Indian call centre, which saw customer data offered for sale. But new figures reveal that outsourcing strategies are continuing to grow in popularity.

A survey of 120 executives across the globe by Accenture has found that 78% of respondents identified improving operational efficiency as the top challenge facing the finance department. But only 15% currently transact the majority of their accounts payable and receivables functions on an automated basis.

Nearly one-half of the executives polled (40%) cited a lack of awareness within their organisation about how IT could improve transactional processing.

‘The findings show that finance executives are challenged to improve efficiency and reduce time and cost to process transactions, yet they are not widely embracing technology to achieve change,’ said Anoop Sagoo, an Accenture partner.

The boom in offshore outsourcing is set to continue, with over three-quarters of large companies increasing their activities, according to research by outsourcing consultants company TPI.

The study, based on a survey of 100 senior UK executives, revealed that 81% planned to increase offshore outsourcing over the next two to three years, while only 4% expected to see operations dip.

Duncan Aitchison, managing director of outsourcing consultancy TPI, said: ‘Our survey results clearly indicate that there is very little disillusionment with offshore outsourcing. However, there is a general shift towards more sophisticated sourcing strategies as the global sourcing market comes of age.’

The research also showed that many companies, while intending to grow offshore operations, are readjusting activities they base offshore. Businesses are increasingly taking a global view, separating out processes and deciding whether they would be best based offshore, nearshore or onshore.

But a survey by the National Outsourcing Association has warned that growing compliance and data protection rules could exacerbate problems. It revealed that poorly negotiated contracts and rushed implementation have been the main reasons for project failures. But these problems could be heightened, as growing compliance and data protection legislation becomes a core part of the offshoring environment.

Indian ITeS-BPO sector may employ 470,000 by ’06

INDIA’S Information technology enabled service (ITeS) and the Business Process Outsourcing (BPO) industry will employ nearly 470,000 people in India by the end of financial year 2005-06, as against the 348,000 people it employed in 2004-05, a recent study by National Association of Software and Service Companies (NASSCOM) -- the premier trade body and the chamber of commerce of the IT software and services industry in India -- has revealed.

The study said that the growth in the ITeS-BPO industry in India is driven by the need of overseas companies to access global talent, economies of scale, wage arbitrage and increased profit margins.

Indian ITeS-BPO exports registered a growth of 44.5 per cent in the financial year 2004-05, which translates to revenue of $5.2 billion. According to NASSCOM projections, ITeS-BPO exports this financial year is expected to touch $7.3 billion, 41 per cent higher over the last year.

The Indian ITeS-BPO industry had been dominated by the top 20 players, who control 49 per cent of the industry, the NASSCOM study noted.

Shift in outsourcing focus

Outsourcing contracts will focus on desktop management, data centre operations and network monitoring to tap the $5.5-billion market of infrastructure management services (IMS).

IMS relates to monitoring, managing and enhancing performance of a client’s IT infrastructure backbone. These include managing servers, data centres, networks and assets and providing desk-side support, IT security and maintenance services.

Such operational tasks will become the forte of offshore providers. Indian vendors, with their proven offshore process expertise and a combination of cost and reliability, stand to gain significantly from this opportunity.

A National Association of Software and Services Companies (Nasscom) report said, “Though infrastructure outsourcing has been around for a while, remote infrastructure management services represent a large and relatively untapped segment for offshore Indian vendors. It has been argued that a firm's IT infrastructure is associated and bundled with the physical assets of the IT department and the data centre, and, therefore, precludes offshore delivery.”

“However, it has been observed that 60-70 per cent of the IT services surrounding the data centre, specifically the support functions that manage and maintain the data centre, have been successfully executed remotely — and is hence offshoreable,” it added. It is estimated that 40-60 per cent of the IMS pie may be efficiently delivered through a global delivery model. This translates to a market potential of $55 billion.

“Offshore IMS is a logical extension of India’s offshore-based delivery capability and represents a sizeable opportunity for the vendors. Several global service providers such as IBM, Atos Origin, Accenture, CSC, HP and EDS have already moved components of their infrastructure services delivery processes to India,” the report said.

Indian IT firms are also busy establishing their credentials in this space. HCL Comnet, Infosys, Patni, TCS and Wipro are among the leading Indian vendors, who offer infrastructure management services. According to Forrester, Indian vendors will gain significantly from this opportunity. According to Gartner, the collective contract value for this annualised spending is more than $600 million.

Being a Desired Outsourcing Hub

It is believed that the efforts by the Malaysian Government to promote the information and communications technology (ICT) services sectors could make the country one of the strongest competitors to India's business process outsourcing (BPO) dominance in the coming years.

There is a growing trend of companies from developed nations outsourcing Latest News about Outsourcing IT jobs to the Asian region -- including Malaysia -- as a strategy to cut costs and boost profitability.

This can be attributed to the fact that this region has the ability to offer a huge pool of knowledge workers at a low cost.

In the Asia-Pacific region, India and China have emerged as two candidates which top the list when it comes to offshoring IT jobs. Both can offer cost benefits, abundant offshoring experience and people skills.

Challenging the Leaders

Malaysia is also ranked highly among the locations competing for offshore jobs. Factors such as low infrastructure Discover a better way to manage the business of IT with IBM Tivoli solutions. costs, attractive business environment, and high levels of global integration have helped Malaysia become more attractive to foreigners.

It is believed that the efforts by the Malaysian Government to promote the information and communications technology (ICT) services sectors could make the country one of the strongest competitors to India's business process outsourcing (BPO) dominance in the coming years.

Malaysia should be able to compete effectively with other markets, given the continuous efforts to raise educational levels, high investment in research and development (R&D), and extensive training.

Market research firm International Data Corp. (IDC) reported that the local IT outsourcing market is expected to grow at a compound annual growth rate of 27.2 percent over the next five years, hitting the US$349.2 million mark in 2008.

Beating the Competition

Some of the popular IT outsourcing jobs include operating data centers, IT infrastructure, applications development and information management functions.

The American Malaysian Chamber of Commerce (Amcham) sees Malaysia as an attractive location for foreigners to invest in BPO and shared services.

Despite the intense competition for BPO and shared services for foreign direct investment (FDI) among regional countries, Malaysia is one of the leading candidates given the ease of doing business here.

Amcham noted that American companies are increasingly looking at Malaysia and other Asian markets as possible regional or global centers for BPO or shared services investment.

The Malaysian American Electronic Industry (MAEI) Annual Survey 2005 noted that there have been an increase in the number of American firms relocating back-end business functions, including IT support services to Malaysia.

Multimedia Development Corp (MDC) and The Association of the Computer and Multimedia Industry Malaysia (Pikom) are also promoting Malaysia as a hub for BPO and shared services.

Poised for Success

MDC is positioning Malaysia and the Multimedia Super Corridor (MSC) as a provider and low-cost location for high-value shared services such as call centers, back office operations and IT centers.

Pikom has a two-pronged strategy which involves attracting foreign organizations to outsource to local companies and to bring local players to regional and global markets.

Malaysia certainly has what it takes to excel as an IT outsourcing hub, and with the groundwork being done by all the relevant parties, the prospects look bright.