The use of offshore IT outsourcing by the public sector has always been a controversial topic. For the national government to be seen depriving UK IT workers of jobs is never popular, while many citizens have concerns about their data being sent to countries with comparatively loose data protection laws.
This controversy bubbled up again in June when two public sector outsourcing stories hit the headlines. First, it emerged that Service Birmingham, the joint venture between Birmingham City Council and services giant Capita, is planning to outsource 100 IT roles to India before the end of the year.
Second, Hewlett-Packard confirmed that it was consulting with the government over the possibility of outsourcing a number of roles under its contract with the Department for Work and Pensions – currently delivered from various sites in the UK – to its operations in India. The decision whether to approve HP’s plan now rests with the DWP.
The backdrop to this, of course, is the government’s swingeing budget cuts. Birmingham City Council set up Service Birmingham in 2006 with the goal of saving £1 billion over ten years, but last year it was told it had to make another £300 million in savings, with half of that expected this year.
In the case of the DWP, however, the fact that HP has initiated the plan suggests it has more to do with the supplier’s own troubles. In a recent memo that was leaked to the press, HP CEO Leo Apotheker warned executives that the company’s current level of staffing is “unaffordable given the pressures on our business”.
Both moves have been criticised by trade unions. Unite called on Birmingham City Council to scrap its offshoring plan, while the Public and Commercial Services Union said it had not ruled out industrial action against HP.
But many people believe these are simply the latest signs that the taboo surrounding offshoring in the public sector is crumbling under the sheer weight of budgetary constraints.
If this is the case, it could well affect the availability of skilled IT workers in the UK in future.
Georgina O’Toole, public sector IT analyst for TechMarketView, believes the government will gradually come to use more offshore resources
I think we’ll continue to see the odd team offshored here and there, under the radar, and it will soon add up. A lot of government offshoring already takes place that the public doesn’t know about – especially around application development and back-office admin – because it’s being done by local suppliers with offshore resources.
The government has to take a balanced view of the benefits to the UK as a whole when it thinks about offshoring. For example, it may save some money by moving jobs offshore, but will it lose more than it saves through paying benefits to workers who lost their jobs as a result?
Duncan Aitchison, partner at outsourcing advisory firm TPI, says the economic forces driving IT work offshore are strong
Public or private, most customers are interested in getting a better deal. And with the public sector’s current focus on saving money, any avenue for providing the same service for a lower cost is going to be considered.
For the outsourced supplier, though, it’s not just a matter of getting work done cheaper. There is also a demographic issue. Western economies have shrinking, ageing populations and the demand for technology skills needs to be satisfied somehow.
The value of any discussion about what the we might have been able to do to prevent this is moot, unless somebody can go 20 years back in time and change the demographic profile of the population.