Work Foundation says offshore threat "exaggerated"

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The fear of large numbers of good quality British jobs being outsourced to rapidly developing countries such as India may be overstated, says a new report published by The Work Foundation.

Despite the rhetoric of an abundance of Indian knowledge workers hungry for British jobs, research published this week by the skills think tank says there is little direct evidence so far of significant job migration, while trade in information and communications services with developed countries such as Germany dwarfs that with India.

The report, 'Offshoring, a threat for the UK's knowledge jobs,' said the UK imports almost four times more computer and information services and over sixteen times more business services from Germany than from India. And India ranks fifteenth on the list of countries from which the UK imports services.

The research cites data compiled during the first quarter in 2007 from a service set up by the European Foundation For The Improvement of Living and Working Conditions, the European Restructuring Monitor recorded 420 business restructuring cases in Europe. These cases announced 132,762 job losses and 184,511 job gains.

As a result, it says only 5.5 per cent of all jobs lost were lost due to offshoring. For the year 2005, the percentage of jobs lost due to offshoring was even less; just 3.4 percent of the total jobs lost.

Katerina Rüdiger, author of the paper said: "The evidence suggests that, while trade in services between the UK and India is certainly rising, it is not happening nearly as fast as is sometimes imagined - an increase from 0.4 per cent to 1.2 per cent between 1995 and 2004 - less of an explosion more of a slow evolution."

But Ovum analyst for the IT services practice, Phil Codling was scathing of the report's research methods. "The report is right in emphasising we need a more balanced view of the migration of work offshore, however the numbers it is based are clearly wrong."

By contrast to the Work Foundation study, Ovum's IT services practice found that over 20 per cent of the work carried out in the UK IT services industry is carried out offshore and that percentage is still growing. "Anyone knows the numbers of jobs offshored are in orders of magnitude much greater that the Work Foundation is claiming, which undermines the research.

"Even IT services companies are saying they have reduced headcount in the UK in favour of offshore locations and that they won't grow them again. But that's the same in more expensive locations [in terms of cost of labour] around the world."

The criticism certainly throws the report's conclusions into doubt when it argues that "self serving claims from consultancies and aggressive PR from outsourcing companies themselves has tended to drown out the careful analysis of data regarding offshoring".

But Stephen Overell, researcher for the Work Foundation, told IT PRO: "We will admit there is a need for direct data on this are, but the truth is, it's simply not there." He said the data should not distract from the fact that the report highlights cultural differences and local skills as still critical components of business models.

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