Inside offshoring: Job losses and the backlash

Two of the most contentious aspects of the offshore outsourcing debate are the argument about the loss of jobs from western economies such as the UK and US and the quality of customer service from Indian call centres. As we see more and more headlines screaming about thousands of call centre and software development positions being offshored to India, the backlash becomes more and more hysterical.

But it is a threat that many IT workers feel is real. For the first time a significant proportion of silicon.com readers said they felt their job was under threat from offshoring in our Skills Survey 2004. Other figures, at first glance, are equally alarming, with Gartner claiming a quarter of western IT jobs will move offshore by 2010. Another report by research firm Evaluserve says 250,000 UK jobs will be offshored in the same period.

In the short term there is undoubtedly an impact on some local communities if work is moved overseas but the debate is far more complex than simply accusing multinationals of selling UK workers down the river to save a quick buck by hiring cheaper staff in countries like India.

On a recent fact-finding trip to India to explore the offshore industry, silicon.com found that on the ground in India there is more concern with the US backlash than the UK, and the expectation is that once the US presidential elections are over this November it will drop off the radar of politicians keen to score points with the electorate. The general consensus is that the UK government is supportive of the offshoring trend and that it is an irreversible market force.

We put the key points in the jobs and backlash debate to the main Indian IT companies and Indian IT trade body Nasscom while travelling around Bangalore, Hyderabad and New Delhi. To get the full picture we then put their views to finance union Unifi back here in the UK. Here are their responses.

Are significant numbers of jobs being lost as a result of offshoring?

The argument from the anti- lobby here is that offshoring results in a direct displacement of the UK workforce and has a negative impact on the community and economy. Sudip Banerjee, president of enterprise solutions at Wipro, argued UK companies are struggling to fill these jobs anyway. "It is not as if people are queuing up to take these jobs. And they do it in a disinterested manner. They don’t see it as a career," he said.

It is a position backed by Sunil Mehta, VP at Nasscom. He said: "There is a growing recognition there is a demographic issue in Britain. By 2010 there will be a shortage of people within the working age group."

Dai Davies, communications director at Unifi, said that doesn't take into account the full picture and he said: "The total number of jobs remains fairly stagnant. If you start shifting them to Asia, that comes down."

Offshore backlash – tabloid hysteria or real threat?

Akshaya Bhargava, CEO of Infosys' BPO subsidiary Progeon, believes the UK backlash is confined to the pages of the Daily Mail. "Somebody in Amicus comes and makes a statement and then they show a photo of a train packed with people," he said. "The UK economy is doing so much better and house prices are doing great so there is a general feeling of well-being and I guess some people don’t like it but by and large the economy is fine."

Over at Wipro's BPO arm Spectramind, chairman and MD Raman Roy said the upcoming US elections have created a backlash climate in the short term but that there are advantages for India. "A lot of companies didn't even know India existed. There is a heightened awareness," he said.

But Unifi's Davies claims the backlash is very real and that companies considering offshoring need to take it seriously. "We're already seeing marketing angles coming from companies not offshoring, seeking to create a competitive edge. It is not a racist nationalist issue, it's a consumer choice issue," he said.

Yet the overwhelming consensus from India is that offshoring is an irreversible trend that no backlash can stop. Saurabh Srivastava, executive chairman of Xansa India, said: "The only way to stop it is to close the borders and that doesn't work – the best example there is India. Before that the economy never grew by more than two per cent. Now it is [growing at] 10 per cent."

Articles and commentary on IT offshoring and BPO in India and elsewhere will be appearing on silicon.com over the coming weeks. You can find them all here.