According to KPMG, the recession is expected to prompt a fresh "rush" of employers seeking to outsource services to new locations such as Sofia and Cairo rather than to traditional centres such as Bangalore and Chennai.
But what about the UK? It is incredible to see that companies are off-shoring their outsourced services while the UK is suffering from a declining economy, high unemployment and a lack of jobs. As in the US, the UK government should provide a tax incentive for companies that near-shore their outsourced services rather than sending money and jobs abroad.
Outsourcing has always and continues to provide an appropriate means of reducing cost and employing expert or specialist skills whilst allowing an organisation to concentrate on its core business. But the cost/benefit analysis of offshore versus near-shore outsourcing has changed dramatically in recent years, and in particular since the onset of the global financial crisis.
Now, a business may receive the same or a similar quote from an outsourced services provider in India and one in Inverness. This is due to rising inflation in other countries and the cost of a local liaison to front-end the agreement where there is a disparity in time zones, language and business practices.
Even where offshore outsourcing wins on price, this is rendered insignificant by the risks to communication and security that are involved. In the last two years, undersea cables have been damaged at least twice in shipping or geological incidents, resulting in significant degradation to communications and the time-critical transfer of important data.
And, businesses take for granted the regulation and trustworthiness of the UK business market by comparison with most other parts of the world. The UK is a very compliant society whereas large scale fraud has been widely publicised in the US through the escapades of Enron and recently Bernard Madoff. Astonishingly, the Indian commercial world has been rocked by the recent $1bn fraud at Satyam – India’s fourth largest IT outsourcing company.
We must come back to the much publicised quote, “British jobs for British workers”. Every £ spent in the UK rolls through the economy generating tax revenues at every turn. Every £ spent on an Indian Graduate is a loss to the UK exchequer and most importantly is a waste of the “Education, Education, Education” we have all been paying for since 1997. If businesses can reduce costs to stay in business, whilst keeping that work within the UK economy, my argument is that ministers at the Department of Business, Enterprise & Regulatory Reform (BERR) need to wake up to the notion of a commission or incentive and provide some direction and encouragement before it is too late.