Outsourcing and offshoring

Abstract

The recent overseas outsourcing of a number of business services, such as call centres and accounts processing, has raised concerns about the future of an area of business activity in which the UK has been deemed to hold a competitive advantage. While the future direction of UK manufacturing may have been questionable, the abundance of skilled service workers has long been thought to provide the basis for a strong alternative range of businesses. But ICT developments have reduced the dependence of many tasks from any particular location and made possible the relocation of many service jobs from industrialized to developing countries that provide a suitable infrastructure, high skills labour market and labour cost benefits. The great majority of work which is being offshored is in information technology (IT) and business process or call centre work (BPO). The providers of IT/BPO services include UK specialists, multinationals, and an emerging group of Indian companies. Interestingly, the Indian IT/BPO have not remained as local offshore providers but are becoming competitive multinationals in their own right, winning contracts directly in the UK and opening offices in the UK to supplement their Indian operations (Global News Wire 2002). Offshore capacity is also being developed in countries other than India, notably China, South Africa, Eastern Europe, Malaysia and the Philippines. IT/BPO service companies may rely on partnership arrangements, especially for BPO capacity in India (Air Transport Intelligence, 22 October 2003). Nonetheless, the issues are not simply about saving costs. The emergence of the global knowledge company is said to have the potential to re-shape the relationship between the employer and employee in the service sector in much the same way as manufacturing was altered in the mid-1980s (Sedley and White 2003). For developing countries, the benefits of accumulating competencies in relatively highskilled work have been widely hailed, although a gender gap between male-dominated high-skill software jobs and female-dominated low-skill call centre work is evident and amidst rising wages for skilled work, India is being replaced by other third world countries as low cost destination (ILO 2001).

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