Is it the beginning of the end for UK IT offshoring?
Offshore outsourcing was once heralded as the saviour of UK IT departments as it cut costs without compromising on quality, but recent project failures and IT job losses in the UK could lead many firms to re-evaluate their plans. The director of London-based software developer Geeks Ltd, Paymon Khamooshi, considers whether these recent troubles signal the beginning of the end for offshoring.
NatWest’s IT meltdown in the summer, Standard Charter’s data loss and the recent decision by workers at computer services firm Capita to strike over job losses and work being sent to India have surely sent ripples through the Indian outsourcing industry. As the biggest market for offshore IT services, India stands to lose most if businesses in the UK and US start to look inwardly for their IT services. But is this really plausible?
The Indian IT sector is heavily reliant on offshore deals, primarily from the US and Europe, but it is built on a reputation of high quality at low cost. For the most part this has been fair but there have already been moves in the US to keep IT projects within its borders and reduce reliance on overseas skills. As the economy bites, this makes some sense but only if you can actually do the jobs for less and at the same or higher level of quality.
At the same time the UK is desperate to boost its digital economy. David Cameron has singled out Tech City in London as essential for the UK’s future, but it is the bread and butter technology jobs in large businesses that form the foundation for the country’s IT skills. These jobs and opportunities for skills development have to be protected but they can only be protected if it is economically viable to do so.
NatWest, trying to keep costs low, went offshore to India to fulfil the software management demands of its transaction batch scheduling. NatWest is not alone. Many businesses such as Standard Charter and Capita go offshore to source programming skills or IT management capabilities at a fraction of the cost of UK-based businesses.
But outsourcing, as we have seen, has its risks. As well, culture, data security, process discipline and a risk of failure have to be upper most in the minds of any business using offshore development and management. As NatWest has learned, cutting corners for the sake of cost can have dramatic consequences. Would this have happened if they hadn’t made its UK batch team redundant?
Does offshoring compromise company practices? Does it reduce control? Does it increase security risks and lead to a loss of business knowledge making it more difficult to reverse the move in future? Probably not in all cases but there is enough evidence to suggest that offshoring IT comes with caveats.
So what do UK companies do? Bite the bullet and pay extra for software projects to keep the cash in the UK? Or look to overseas suppliers that can keep costs low and therefore make the business more profitable?
Of course there is an irony here with NatWest, a bank owned primarily by the UK taxpayer. Banks have been criticised for their handling of costs but here is evidence that RBS at least has tried to reduce a cost burden through outsourcing. Short-termism perhaps, but no one is going to be fired for seeking out cheaper alternatives to IT problems.
So the burning question is whether UK software developers and services firms can offer the level of expertise that India can offer and at what price?
The reality of course is that the UK has plenty of expertise and skill but we find it difficult to compete on cost. Yet what if programming time for example, could be reduced by four times? And what if this would lead to reduced development time and therefore massively reduced costs on IT projects?
Not possible? It is possible. Such is the advancement of technology, particularly in terms of programming, that UK developers can now deliver equivalent IT projects at more than half the cost. We’ve already done this with our M# technology. The perception is different of course, but perhaps that is driven by old images of India and is not entirely camped in the reality of what UK developers are achieving on our own doorstep.
Given our skills and these numbers we believe that outsourcing .NET development projects, in particular, should be a thing of the past. If we can cut development time and costs by as much as 4x then, surely, there has to be scope for keeping projects in Britain? UK developers and IT technicians are being given a raw deal by an image that is now outdated, though maybe the problems will have opened the door for home-grown talent, something that would not only help the likes of NatWest and Standard Charter in the long run but our struggling economy too.