Once upon a time the concept of offshore outsourcing was the ‘next big thing’ in clever commercial practice. Just take a function like IT, find a country where it can be handled by high quality staff at lower costs than at home, contract out its management to a local provider and then sit back and reap the rewards.
As the offshoring idea took off, organisations involved in ERP development work quickly spotted that India was producing more English-speaking IT graduates than any other country in the world and began tapping into this apparently endless pool of talent.
Back in the UK, home-grown specialists worried as commentators predicted that their long-term careers would soon be disappearing to the other side of the world. After all, who was going to continue to pay high rates to ERP professionals in the West, when their work could be delivered just as effectively at a relative fraction of the cost by specialists in Mumbai or Bangalore?
However nothing is ever as simple as it seems. While offshore outsourcing is still a popular option for many Western companies, it is nowhere near as common as it was a few years back. What enthusiasts for this ‘next big thing’ had missed the fact that buyers would not necessarily view the dispatch of their investment to a location several thousand miles away with the same level of enthusiasm as a provider. As John Loughery of Oracle consultancy, System Dynamics puts it, “Offshore outsourcing simply hasn’t turned out to be the Holy Grail that some people thought it would be. It might be good from the cost point of view but, in my view, what really counts is control and visibility, which can be difficult to maintain successfully over such long distances.”
Perhaps even more importantly, supporters of offshoring also failed to see that a country as ambitious as India would be unlikely to be happy for long with the status of supplier of cheap labour.
The money that flowed into the Indian sub-continent during the first wave of offshore outsourcing helped to create new IT companies such as Zensar Technologies, Infosys Technologies and Tata Consultancy Services (TCS), which have shown themselves keen to move away from the low-charge end of the market into more sophisticated and consequently better paying work. The logical conclusion of this trend has been a reversal of the classic offshoring model with the opening of offices in key locations across the West. Zensar, for example, has now been established in the UK for fifteen years, while TCS has operations in 50 countries and employs over 5000 consultants in the UK and Ireland alone.
Many of these Indian companies have managed to keep their costs to a minimum by bringing Indian IT professionals to the developed economies, originally on work permits and now under initiatives such as the UK’s Highly Skilled Migrant Programme, on packages which, whilst highly attractive compared to those on offer in the sub-continent, are still much lower than those commanded by local specialists.
The downside of all this has been the marked difficulty in retaining staff once they reach the West, particularly to the potentially lucrative contracts market. Anil Passi, an Indian now working in the UK, says, “One of the key reasons I took a job in the UK in the first place was the money on offer, and contracting can raise your earning capacity even further. Although the UK is culturally different when you first arrive here, I’ve found that skills are very transferable – working practices and expectations in India are just as rigorous as they are here. Consequently I’ve had no difficulties in being accepted as an ERP contractor in the UK.”
This passage of high calibre Indian ERP specialists into the UK market is obviously good news for a sector that is always short of staff and particularly of ‘hybrid’ consultants who combine good technical ability with in-depth business skills. But how long they are likely to continue plugging the staffing gap is increasingly uncertain as India gears up to become a global IT superpower, and Indian employers look to the professional diaspora for their staffing needs.
Almost 10 percent of employees at Intel in India, for example, are now former expatriates returning from working overseas. “I know quite a few people who have gone home after working in the UK for several years,” says Anil Passi. “The pay might only be around half of what they were earning abroad, but, given the dramatic difference in cost of living, they’re actually much better off overall. And it’s not just money that is enticing people back. The quality of work in India is rising all the time as the country shifts its emphasis to higher end services. Any suggestion that you need to go overseas to get good quality experience just doesn’t hold water any more.”
Satnam Brar is the founder and managing director of specialist Oracle recruitment consultancy and Oracle partner, Maximus.