Offshoring losing its shine

A new survey released today that questioned UK IT directors about their attitudes towards offshore outsourcing has found it is beginning to fall out of favour.

A small, but significant six per cent of those questioned by IT specialist, Rethink Recruitment said they plan to bring offshored IT work back to the UK over the next 12 months.

A further 75 per cent of IT departments had no plans to send more IT work offshore over the coming year, while 19 per cent were contemplating further offshoring.

ReThink said the survey backed strong evidence now emerging that the business case for offshoring no longer stacks up as well as it did previously. This is because of wage inflation in overseas IT centres is eroding any potential cost savings, at the same time that quality control and data security concerns become more prominent.

Michael Bennett, ReThink Recruitment director pointed out the survey suggested that for every three IT directors thinking about sending work offshore there is one planning to repatriate jobs to the UK.

“That's quite a significant number and clearly shows that offshoring is no longer a one-way street," he said.

"A lot of organisations saw offshoring purely as a way to cut costs, but spiralling wage inflation in offshore locations, combined with the project management cost of co-ordinating teams across international time zones, can eat into any cost savings."

He added that the maturing view of home-grown IT resources versus those sourced from overseas can also now take account of the fact that it is easier to resolve disputes with outsourced suppliers in the UK than in emerging markets where legal systems can be far less effective, for example.

The recruiter also advised IT directors evaluating the outsourced offshore option should consider the risks and logistics of effective management as well as potential cost-savings.

"Many of the large UK banks that have made a success of offshoring established their own operations overseas, which are directly controlled from the UK,“ said Bennett. “Handing over vital IT functions to an independent third party entails significantly greater risks."

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