ERG mum on offshoring plans

ERG won't talk on offshoring plans

Australian smartcard developer ERG is keeping mum on a ZDNet Australia report that it will use offshore labour for future software development.

CEO of the Perth-headquartered company, Dr Allan Sullivan, told ZDNet Australia this week he would not comment on whether ERG had struck an outsourcing deal with India's Tata Consultancy Services (TCS).

TCS has also refused to comment on the story.

The Indian company's AU$120 million outsourcing deal with Qantas last year created public controversy when the airline revealed 200 of its application support jobs would be offshored to India. Fellow Indian outsourcer Satyam also picked up AU$71 million in contracts for the Qantas work.

ERG has designed the software used in various smartcard projects around the world, especially for public transport systems. One such project is the New South Wales government's Tcard.

To be introduced widely this year, the Tcard will act as a single payment card for all forms of public transport. ERG also designed and implemented Hong Kong's current Octopus public transport smartcard system, among the largest in the world.

Alan Hansell, an analyst with IT research group IBRS, said apart from TCS being able to offer cheaper labour, the deal was probably also a result of the IT skills shortage in Perth.

"[ERG], being based in Perth, would have a limited set of skills it could call on. The drop in computer science graduates at the moment also comes to mind," he said. "So the result is you have to pay more to get the top people, which can't help."

"I think Perth is struggling to attract people at the moment because of the rising cost of housing," he added.

Indian outsourcers like TCS were also capable of considerably lower cost labour, according to Hansell.

He said he believed Indian outsourcers were sometimes capable of performing such work at 15 to 20 percent lower cost than if the work was carried out locally.

ERG has struggled with rising costs in recent times. Last year the company borrowed AU$14 million to maintain its finances and took a hit on the sharemarket as a result.