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By Andy McCue, 15 January 2004 17:50

NEWS The move towards mainstream outsourcing of IT functions to low-cost offshore locations such as India is not inevitable, with firms prepared to pay a premium for local specialist skills, according to the latest silicon.com CIO Jury.

Analysts have been predicting an offshore boom over the next few years as organisations look to cut costs by using cheaper labour in countries like India, and 2004 has started with high-profile decisions to offshore by Axa, Abbey and Barclays -- although the Nationwide building society said it will stay at home and invest in its UK IT and call centre operations.

But two-thirds of our 12-man CIO Jury said they do not think the trend for offshoring is inevitable -against the remaining four, who said that it is.

Graham Yellowley, director of technology at Tokyo-Mitsubishi Bank in London, said the current public backlash against moving jobs abroad will prevent knee-jerk offshoring purely to save costs: "A realisation and reassessment of what services should be outsourced to low cost locations will occur and a readjustment will take place."

Frank Coyle, IT director at John Menzies Distribution, dismissed the hype surrounding the reasons for offshoring, which he said needs to be used sensibly and carefully.

"Any company jumping offshore, without looking first, just to keep up with the latest fad, or because the FD thinks that he can smell a big cost saving, will end up having to recover from a shambles. The FD will likely have moved on by then, no doubt having added 'offshore outsourcing' to his CV," said Coyle. 

Martin Armitage, head of the global information organisation at Unilever, said the demand for those roles currently being offshored will decline as they become more automated anyway -- a view echoed by Dharmesh Mistry, CTO of edge IPK, who cited the same trend in manufacturing during the 20th century.

Ian Butterworth, director of central services at Norwich Union, said outsourcing jobs overseas will not suit every organisation despite the "skill and cost advantages". "Offshoring/outsourcing are tools and the trick is to know when to use them," he said.

Ric Francis, CIO at Safeway, said his company has a long-term relationship with a 'near-shore' partner in Malta, which offers flexible development and support. "Not quite as cheap [as India] but more local, accessible and, in our experience, more predictable quality."

Graham Benson, information services director and CIO at Screwfix Direct, said the trend for offshoring is inevitable but only for skills that can be considered commoditised. "If an organisation is to retain its competitive edge, it must be careful to retain the technology IP in-house," he said.

Today's CIO Jury was:

Martin Armitage, Head of Global Information Organisation, Unilever
Ian Auger, Head of IT and Communications, ITN
Graham Benson, Information Services Director and CIO, Screwfix Direct
Ian Butterworth, Director of Central Services, Norwich Union
Frank Coyle, IT Director, John Menzies Distribution
Ric Francis, CIO, Safeway
Derek Gannon, IT Director, The Guardian
Nick Masterson-Jones, IT Programmes Director, BACS
Dharmesh Mistry, CTO, edge IPK
Pete Smith, Director of IT and Telecoms, Inmarsat
Graham Yellowley, Director of Technology, Tokyo-Mitsubishi
David Yu, CTO Betfair

If you are a CIO, IT director or equivalent at a large or small company in the private or public sector and want to be part of silicon.com's exclusive CIO Jury pool, or you know an IT chief who should be, then drop as a line at editorial@silicon.com