Britain...Open to Outsourcing

Who can remember that distant hazy past where Barack Obama was campaigning to become president of the USA and he talked of creating more American jobs? The emphasis was always on American jobs, rather than American companies sending work overseas to other countries, just like all those IT jobs that are outsourced to suppliers by the giants of American industry...

And here we are again, reading of a similar story in the news, not during an election campaign, but during the global charm offensive of British Prime Minister David Cameron. Cameron has been in India this week talking to political and business leaders there about the special relationship between the UK and India and how we really ought to work together a bit more in future.

The IT and sourcing industry is at the forefront of this debate. It’s true that there are many Indian investments in British business already; Tetley tea, Corus steel, Jaguar Land Rover vehicles… all owned by Indian firms, but the old brands remain. The shopper in the supermarket has very little idea of who owns the company that makes his/her teabags, or yogurt, or biscuits.

When technology suppliers from India or China regularly start winning major contracts, then the government starts paying more attention. The British government has already announced an absolute cap on non-EU immigration. Of course, they don’t really know what the number should be and so trade bodies like NASSCOM in India are furiously lobbying to ensure that if there is going to be a cap on workers in the IT business, then it has to be either realistic, or generous.

Speaking this week on the campus of Infosys Technologies in Bangalore, Cameron said: "You will find Britain one of the most open and progressive countries in terms of being open to outsourcing." This was in response to a question about whether his government would cut back on the use of offshoring contracts.

It all sounds remarkably like Doublethink, the term used by George Orwell in his novel 1984 to describe the power of being able to hold two contradictory beliefs in your mind simultaneously and being able to accept both of them as true.

Because the reality is that since the new British government came into office in May, they have announced the immigration cap and a complete review of any government outsourcing contracts worth more than £100m. That has scared suppliers like Tata Consultancy Services, who won a lucrative contract to deliver the systems underpinning the new state pension for British citizens just before the last government left office.

The US president was caught up in similar debates during his election campaign, but his time in office so far has not yielded any killer blows to the outsourcing community. As many expected, he has bigger fish to fry than controlling offshoring in the IT industry.

The real question for developed economies like the US and UK is what they have to offer to India. Europe and the US still has most of the customers buying IT services, and many of the supplier companies are still headquartered in these regions, but the fast-growing economies, such as India, are no longer talking about offering cheap IT services. They are offering the global best of breed.

The British Prime Minister doesn’t have much to offer India, other than friendship. The USA still has more economic and military clout, but it won’t last for long. Look at the growth rates in India, China and Brazil… these are the countries where the global IT industry is headed. It won’t be called offshoring for much longer when we are all working with Indian technology firms.