Offshoring, Jobs, Consulting

Offshoring unskilled work is tip of the iceberg

09 Nov 2004 | (Survey)

ALS Consulting comments on the CBI survey on offshoring trends in the UK.

A survey published today by the CBI sheds light on the benefits of offshoring for the country’s economy, companies and higher quality job creation – but the price to pay is that lower-skilled jobs are on their way to extinction. This is, however, only a part of the story according to ALS Consulting, as many factors are pushing companies to cut low-skilled jobs. "The notion that low skilled jobs can somehow be saved if offshoring doesn't take place is misinformed,” says Tim Lloyd, Managing Director of ALS Consulting, an independent advisor on outsourcing.

Commenting on the results of the CBI survey, Tim Lloyd says that many people don't realise that offshoring is just one route that companies are following which will remove low skilled jobs over the next few years. “If one in four UK companies are considering moving jobs offshore I believe at least as many again are pursuing other routes, such as automation, to get to the same objective. However, one of the main conclusion of the CBI survey is still valid – upskilling is not only essential to maintain employment levels, it is vital if companies are to gain a competitive edge through offshoring.”

Mr. Lloyd continues: "There is one other important point to note, which is that the UK has itself been the beneficiary of offshoring jobs over the past ten years from continental Europe through the large number of shared service centres that multinationals have set up here, at least in part because we have had lower labour rates. However, this trend is now reversing as low cost Eastern Europe becomes a location of choice for new operations which require the language skills that India and China cannot provide."

It is critical to understand that offshoring is a manifestation of globalisation which impacts everyone. According to Rick Simmonds, partner at ALS and specialist in offshore outsourcing, “low skill jobs are clearly going offshore, in manufacturing and call centres for example, but so are high skill jobs in areas such as computer programming, and research & analysis. In the long term offshoring will be possible for all roles except those which require strong cultural empathy and/or co-location with the customer.”

Organisations need to carefully consider the risks of offshoring, warns Mr. Simmonds, "In addition to the obvious geo-political risks, there are many others, including for example whether Intellectual Property Rights can be protected in offshore jurisdictions. Sustainable competitive economics is also an issue - after all, the business cases which brought these centres to the UK and Ireland only a few years ago are no longer valid."

Mr. Simmonds continues: “Another danger is that customers are too often left out of the equation in outsourcing initiatives – and many UK customers have a rather negative view of offshoring because of their experience with call centres. But an increasing number of UK companies, large and small, are outsourcing part or entire departments for back-office operations such as accounting, payroll, procurement or billing which has a very positive impact on the quality and speed of the services we receive as customers.”

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