Horses for Sources – Dangerous Times for the Outsourcing Industry

There's a very thoughtful article by Phil Fersht, the man behind Horses for Sources, on their website here. He points out that President Obama is not exactly positioning himself as a fan of outsourcing, and is attacking his rival, Mitt Romney, on the basis of Romney's past work with Bain where he championed outsourcing and off shoring.

"President Obama has made attacking Bain Capital’s promotion of itself as a “one stop outsourcing shop” as the focal point of his campaign.  And this is a serious attack – he has $512m in campaign money left to burn, and only $25m a month is currently being spent on attack-ads from both parties – the worst is yet to come (from both sides)".

 

Progress - but not Outsourcing

Obama is appealing to the fear that US jobs are being “shipped overseas” and he will “insource” them back to the US if he is re-elected. Not that he actually has any real power to do that unless he promotes some pretty complex taxes that would almost certainly have unintended consequences, we suspect.

Fersht points out that this is really about the need to make the US labour force competitive - both in terms of wage levels for some roles, where the US is simply too expensive, and skills for others, where there aren't the right skills in some areas of software development for instance.

It's interesting that, despite unemployment in Europe being far higher than that in the US, we haven't seen much serious promotion of protectionism - yet. No street demos against jobs going to India, no organised boycotts of cheap Chinese imported goods (perhaps we're all too wedded to our cheap Primark clothes and  Reebok trainers). We've seen a few firms making a virtue of having their call centres in the UK, as a marketing point, but no negativity from politicians at the level Obama is now actively pursuing.

But if this tactic works for Obama, how long before European politicians start taking a similar line? Might Ed Miliband make capital out of it during the next UK election campaign? Let's face it, it's always convenient to blame "them" (whoever they might be, preferably foreigners of some sort) for a country's problems. We've got anti-business sentiment currently in a few areas, notably banking, but it could get a lot worse if the European economies don't pick up soon.

Anyway, do read the full Fersht article. He ends with this rallying call to the industry.

"... it’s time to evolve how we approach and promote global services.  Yes, it makes great conversation, but now the Pres is forcing the industry into a corner. We have to match the misperception of how the business and IT services industry operates with reality of what we really do – it’s clear these prejudices are not fading with time, the flames are always there to be fanned when it suits the purposes of protectionists and politician".

 

 

Voices (3)

  1. David Orr:

    IBM have a huge division in Bangalore in India from where US & EU/UK IT services are supplied. SAP from SW1 for Avon & Somerset Police, Somerset County Council and Taunton Deane was configured & built in India.

    Hope they haven’t just had a power cut there ……How is that working for you by the way?

    The Treasurer (Resources Director) to Somerset County Council publicly declared in an Audit Committee meeting this year that: Compared to SAP installations at neighbouring Dorset and Wiltshire Councils, SAP from IBM/SW1 was “poorly configured”. So much for “World Class IT”.

    Over three years later and not all of the reported problems with SAP have been resolved. I inspected the accounts (SAP) in Somerset County Council this week and instead of integrated reports, I frequently found printed screen snapshots with hand-written notes. Asset records are held on spread sheets. Integrated system? Reports at the “press of a button”.

    The key issue is that in-house training and skills development for the local, regional and UK economy can be lost through offshoring these highly skilled (Nationally strategic?) IT jobs. That impacts on the local economy and hits UK PLC.

    It is about short term profits for the outsourcer and not for the long term interests of the UK or my town or my County. Overall, the reduced tax take, loss of NI and Corporation Tax etc may mean that the “savings” claimed end up being virtual.

    Somerset County Council IT Services had a good record for not just local recruitment, but for skilling up young people with degrees and recognised qualifications. I doubt that IBM/SW1 are matching that – It would in the short term reduce the need for consultancy & lower income, so where is the incentive?

    In the long run (think of your children & grand-children) then who thinks it is a good idea to export knowledge & skills to a competing foreign competitor in a global economy?

    Answers on a postcard please from India, China etc……….

  2. Final Furlong:

    Great article and blog.

    The Chinese Government has already instructed its officials to purchase only Chinese manufactured cars. Rest Of World can only stand by and watch as most global innovative manufacturers (like Apple in the US and Dyson in the UK, for eg) now rely heavily upon China.

    1. Peter Smith:

      More on China on Thursday for you…
      peter

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