• The UK is a world leader in outsourcing, home to almost a fifth of all outsourcing contracts.In some ways, I can link this to the post below on P J O'Rourke. This industry has grown due to deregulation legislation passed in the 1980s. Yet those who were so vociferous in lobbying for it have failed to shout about the positive achievements which have emanated from it. Instead, all we hear about in the media are the occasional failings of deregulation and privatisation. If those of us on the right who believe in deregulation and privatisation aren't careful, we will soon be heading back to the dark days of state control and stifling regulation - sometimes I feel as if we are there already.
• The latest market data shows a 24% increase in the value of contracts signed in the UK in the first half of 2008 compared to the first half of 2007.
• Business services make arguably the largest contribution to the economy of any sector, contributing nearly 10% of total UK Gross Value Added, and employing 1 in 7 workers.
• Business services contributed £18 billion in surplus to the UK’s trade balance in 2005.
• The support services sector was estimated to be worth more than £303 billion in 2007, with growth of 8% from 2002 - 2006.
It's up to trade bodies like the BSA and the successfully privatised companies to demonstrate their success and give those of us who want to defend them the ammunition with which to do so. If we just let the left dominate this debate we will deserve the consequences.
18 comments:
It would be really interesting to find out how much of that growth is overspend on government contracts and PFI projects that would have been cheaper to do as a strait building project.
As with everything it's about the subtlety of the argument and catch-all phrases like:
"those on the right who believe in deregulation and privatisation"
..tend to confuse the issue. Regulation per se should never be viewed as inherently flawed or inherently welcome - it depends on the situation.
It's almost beyond debate that many of the current US problems stem from the Commodity Futures Modernization Act of 2000 which liberated bankers & traders from the very restraints put in place 70 years previously by FDR - an example of unwelcome and unhelpful deregulation which Conservatives can quite comfortably oppose.
Iain
"Outsourcing gets a bit of a bad press in this country - and mostly without foundation"
I am sorry Iain, you make such sweeping statement. In IT sector outsourcing has gone mad. I will give you two examples, but cannot give you more details for obvious reasons. Nevertheless they illustrate the points I make.
1. One exam board with the largest registered GCE and GCSE students students, gave software design contract to a company in India with the intention of converting all the paper based marking to electronic marking. This company also acts as call centre for examiners who have difficulties in handling their software. The motivation was to save cost. In reality, eventhough the software for on-line marking has gone through several revisions, it is far from being of acceptable quality. It is because, simply this Indian company has very little knowledge of secondary school system in Britain, and that is reflected in their software design and in the answers the company techies give to examiners on call centre query lines. These techies in India do not understand the difference between GCE and GCSE and what it implies. There are good companies in the UK who could have done the job. Cost savings sounds like cutting corners here.
2 a) In the financial sector, one bank has handed over all its customer service processes to India. Queries on aspects of bank transactions, credit card statements elicit replies which are at times hilarious. The customer services there have difficulties in understanding the way we transact here. Hence you can see NatWest advert proclaiming their call centres in the UK. The turn out of employees in this bank's call centres in India is huge and has security and privacy implications.
a) Much more serious is the IT services like back office maintinance etc.. Jobs are not only shipped to India by way of outsourcing , these companies are increasingly taking over our own IT companies, making their presence in Britain, sacking British employees and bringing in Indian IT graduates. From the Home office figures, the number of work permits given to them are in the order of thousands since last few years, and for every work permit holder, there are at least a family attached to them. As these IT employees are paid less than the British counterpart ( almost
40-50% less), the taxes they pay is less and there is net expenses for the government as their kids
need schools, their family need healthcare, housing etc.. Many tend to go far council housing in some areas and this skews the housing problem. The net result is these work permit holders and their families are burden to the state.
There are so many IT practioners and IT graduates who are now unemployed as a direct result of BLair and Brown outsourced modelling. Still there no upper limit on these work permit numbers. Digby Jones is the main villain. I once talked to him about this outsourcing problemm in IT and its implications for my students in computer science here and he simply dismissed it. The Germans do differently. I heard they are rethinking about their strategy as the credit crunch is hitting them hard.
I can give you list of other outsourcing problems. I wrote to David Cameron many times and I usually get sanctimonious replies from his office not addressing the issues. Not surprising that he is down many points in recent polls. Cameron and his team should address our problems,become more visible and not become hostage to
ideologies now. Otherwise, I do not see them winning in the next election. It is sad as I have been voting Tory for 30 years.
Well done the BSA. There's nothing wrong with public services - far from - but there's no reason why the state should deliver them. Outsourcing lets different organisations focus on what they're best at, not get side-tracked by admin. Unless it's admin they're best at, of course - then they shouldn't get sidetracked by service delivery.
Is 'Norman' Norman Tebbit?
Anon 1.36
I am Norman, but If I sound like Tebbit, I am flattered.
I have no problems in outsourcing per se if that means, agencies with in a country employing its citizens providing public or private services.
But what I was commenting on is the assumption outsourcing is a winning strategy. I gave two examples in IT, where outsourcing at another level works against Britain.
The father of IT outsourcing is Bill Clinton. It is no coincodence that IT outsourcing to India went up many notches when Blair took over in 1997, Just as Clinton destroyed American IT jobs and services, Blair has destroyed British IT jobs and IT services. We have good small companies which would do a better job than their Indian counterparts. At the end, if one adds up: the quality of IT products, the quality of IT services, the oursourced companies entering Britain as subsidiaries and bring their people etc.. the cost differential will not be much but produce severe side effects.
When Obama was criticising shipping jobs to Asia, he was right. He will reverse much of what Clinton did and Bush followed.
Eh???
Outsourcing and deregulation are quite different things, with no necessary connexion.
Outsourcing === pay cut
It's simple.
I could spend days picking holes in those statistics.
1. "Business services" includes a lot of much higher bvalue added services than outsourcing (lawyers, technical/ engineering conultancy, insurance broking, financial advisory work, offshore gas exploration). The statistics do not way whether we are net imprters or exporters of outsourced services, but the likelihood is that we being a high cost country are net importers of outsourced services and net exporters of other services.
2. A lot of the outsourcing in the UK has been contracts given to EDS, Accenture, IBM and their ilk that have shown to represent poor value.
3. It is not clear what is included in the £303 billion value of support services (or where it applies or at what date), but if the implication is that nearly 25% of UK GDP is in outsourcing, then the statistics are clearly wrong. A susbtantial part of the £303 billion will be services that have always been carried out by specialist third parties rather than outsourcing.
There are also managerial opportunities for people like me. I live in Manila running the accounting division of a large finance outsourcing operation for a FTSE 100 entity. 3 out of 4 expats here are Brits. Our pay is not GBP denomiated so the recent collapses in Sterling have actually increased my monthly pay!
Outsourcing does not always mean loss of jobs and opportunities to foreign staff. For some it means career opportunities and more money.
Alex - read the report, this is explained. The problems of trying to measure outsourcing are also explained.
The biggest benefit has got to be working for a specialist firm - more opportunities to be promoted. And in the public sector - less opportunity to skive.
I'm sure there must be some outsourcing success stories, but I struggle to find one from personal experience. I'm not allowed to ring my bank's local branch, having to speak to India instead; no doubt lovely people, but I have to speak slowly and clearly without use of the vernacular in order to be understood, and I often have to ask them to repeat what they are saying. My local Crown post office was 'outsourced' and now gives appalling service via a staff paid significantly less than under earlier arrangements. If I complain to the outsourcer's HQ I get fobbed of with the corporate equivalent of 'get stuffed'. Each represents a small but detectable diminution in the quality of my life, over which I have no control.
The main reason for all these changes is, I suspect, Bliar's proper keenness to see inflation controlled, which he effected by dubious means, ie anything that cut costs irrespective of quality and value. Govt support of the takeover of UK retailing by the supermarkets is another aspect. What will happen to pricing when they have finally driven the last independent filling-station out of business? Will prices (a) fall, (b) stay the same or (c) rise?
Obviously, (c), but all in step so that we don't notice, and without decisions being recorded, to avoid action by the Monopolies Commission.
As for deregulation, if the USA - land of the free, home of capitalism red in tooth etc - found it essential a century ago to curb the activities of Carnegie, Rockefeller, Morgan etc, it's a bit difficult to argue that we don't need to. They did it very fiercely and US corporations still came to rule the world, so the 'intolerable constraint' argument doesn't wash.
Out sourcing may well be big business, and a popular and trendy thing to do, but that does not make it sensible - any more than giving mortgages to people who have no hope of paying them back was sensible, although not too long a popular and trendy thing to do.
Iain,
Your friend Mark Fox says:
"The UK is a world leader in outsourcing, home to almost a fifth of all outsourcing contracts"
Let me expand this to touch the IT sector. A university student of mine graduated 40 years ago, an Indian national founded an Indian IT Software House which grew and grew and it has recently acquired a UK-based IT services company for £450 millions. I am sure within 2 years, it will be 'Indiansed in the UK' by gradually replacing British personel at all levels by Indians from their Bangalore headquarters who arrive on workpermits thanks to our generous Home office and Brown's munificence. This company is registered in the UK, can call itself UK company, can operate all over the EU, but majority of its personnel will be Indian nationals. It will maintain a small British managerial team for negotiations of contract. It can compete as a UK company for any contracts here but most of the work will be done in Bangalore through subcontracting the work.
Those who are not familiar with IT will tend to dismiss such subcontracting as low tech metal bashing type of work but the truth is different. As I said, this has the effect of taking away jobs from our IT graduates in such intensity that UK expertise in some IT areas are being lost for ever. There are certain areas in software systems which has both critical civilian and military importance can only be carried out by the Indian IT people in India because our universities and software houses stopped training people in these areas, but the software systems are
still operating needing maintenance and changes.
This is NOT the case in the USA where outsourcing is carefully controlled and work associated with American homeland securiy , NASA and Military can only be carried in USA by American citizens.
I know EDS, Accenture and IBM subcontract most IT work to India.
This work is undertaken by Indian nationals in India. I will not be surprised if my biometric details for my ID card is handled in Bangalore India in a few years time. What about passport database work of Home office? They may have a UK registered company for the contract, but what about most of the subcontracted IT work? Where is it done?
Hence the above statement of your friend should be taken with a large
spoonfull of salt as far as IT is concerned.
Iain, I have worked in the USA and I know that for a large category of work, a simple resident status
(greencard) is not enough. American citizenship is required most needing security clearance even if the work is civilian in nature but has governmental links, subcontracted out or not, IT or otherwise.
In Britain only a narrow category of work there is requirement for citizenship and security clearance. Work in parts of MOD, MI5 and MI6 and GCHQ. Most jobs here does require only a resident status governmental links or otherwise, subcontracted out work needs none. Can be done anywhere in the world in the case of IT.
"The UK is a world leader in outsourcing, home to almost a fifth of all outsourcing contracts"
Yes, Iain. One of the many reasons for the deskilling of the indigenous population.
The tories told us that we could export all our industry and manufacturing to Asia cos we could live off services. Then nulab told us we could export our services to Asia cos it's cheaper, innit?
Now we are left with housing and a small bunch of City tories living off the crappy work done by these foreigners. How's that all working out?
yes
but they cannot clean our hospitals
ask any nurse or doctor they want hospital cleaning done in-house
just like private hospitals do
How many vital call centre jobs have gone to India ?????
thank goodness for Outsourcing its been so good for those Northern towns to get on their bikes and come to London
why cant we outsource politicians
rather than workers jobs
Keep posting with more new information...
Regards,
back office service
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