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Steep wage inflation in offshore IT centres is beginning to unravel the rationale behind outsourcing IT jobs from the UK in pursuit of cost savings. Three-quarters of IT directors said they had no plans to send more IT work offshore in 2009 to locations like India, where the economy is growing by about 9% a year. Almost one fifth of the sample said they would increase their IT offshoring in the coming year, while 6% said they would repatriate offshored IT work back to the UK. Although, then, just a small fraction of the directors expected to bring offshored IT work back to the UK, the number was “significant”, according to the firm behind the figures. ReThink Recruitment explained that its finding – that for every 3 directors thinking of offshoring, one wants repatriation – proved offshoring was “no longer a one-way street.” Its director Michael Bennett said that, in the past, a lot of organisations saw offshoring purely as a way to reduce costs, but a mixture of factors were now eroding its cost advantages. “Spiralling wage inflation in offshore locations, combined with the project management cost of co-ordinating teams across international time zones, can eat into any cost savings,” he said. “IT Directors increasingly accept that the UK has other competitive advantages which offshore destinations do not possess. For example, it is usually much easier to resolve disputes with outsourced suppliers in the UK than in emerging markets where legal systems can be far less effective.” Disputes can be costlier and more difficult to resolve where control of IT functions is handed to an outsourcing partner, rather than managed by a branch or subsidiary offshore. Mr Bennett explained: “Many of the large UK banks that have made a success of offshoring established their own operations overseas, which are directly controlled from the UK. Handing over vital IT functions to an independent third party entails significantly greater risks.” Sep 16, 2008 Email this article Printer friendly page Previous Page
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