Sending jobs abroad means better jobs at home, says gov't IT panel

Short-term losses may be outweighed by long-term gains...
Written by Nick Heath, Contributor

Short-term losses may be outweighed by long-term gains...

Indian outsourcing

Government guidance on sending IT jobs offshore claims that the practice can lead to highly skilled IT positions being created in the UKPhoto: blrframes

Offshoring entry-level posts to countries outside the EU could lead to the creation of highly skilled jobs at home, according to IT guidance issued by the government.

The Government ICT Offshoring (International Sourcing) Guidance, published this week by the Cabinet Office CIO Council, argues that offshoring low-skilled tasks could allow UK companies to focus on more highly skilled activities that generate additional income and create new jobs.

The document, which aims to provide guidance to public sector bodies considering procuring IT services from overseas, says: "Arguably, jobs which are lost in the short term are often gained back as a result of a growing economy.

"So the medium long-run impact on UK employment is likely to be far less severe than the number of jobs apparently lost.

"Indeed, the net long-term impact might be for UK employment to rise as a result of the efficiency gains if the reallocation leads to higher growth as people/firms move into higher value-added activities."

It says offshoring can create IT jobs in "highly skilled areas such as requirements specification, security, architecture and commercial management".

To support the contention that offshoring can boost job prospects, the document cites estimates by the Leverhulme Institute that between 1994 and 2004, offshoring created 100,000 jobs in Britain and increased the turnover of British firms by £10bn.

"Its research shows that job gains by far outweigh the losses," the document says.

Where offshoring results in job losses, the guidance says the scale of these losses needs to be measured against the national turnover in jobs each year.

"It is also important to see potential job losses as a result of offshoring in context.

"Average turnover in the UK labour markets is currently around 300,000 jobs per month. So even if offshoring were to run at around 50,000-60,000 jobs per annum, it would only amount to a fraction of the turnover in national employment."

The document notes that offshoring IT jobs supporting government can generate negative publicity, advising public bodies that "if the service currently employs staff in the UK whose jobs would be lost under the new arrangements, you would expect to have to take instruction from ministers before proceeding".

The offshoring of IT roles serving government has provoked controversy recently, with unions criticising plans to outsource 200 jobs providing IT support to the Department for Work and Pensions and up to 100 IT roles supporting Birmingham City Council.

The document also outlines the potential risks attached to relying on offshored IT services.

According to the guidance, the risks include increased threats to information security and difficulty managing services, which it says need to be offset by ensuring offshore provision complies with all relevant regulations, such as the Data Protection Act, and is accredited to the same standard as services run from the UK.

Offshoring mainly saves organisations money by allowing them to tap into lower labour costs abroad, the document says. It quotes figures showing that a senior software engineer in the UK earns on average £38,750, compared with an average annual wage of £9,703 for an equivalent post in the top five offshoring destinations of India, China, Malaysia, Thailand and Indonesia.

Editorial standards