American and UK employees and consultants are becoming increasingly concerned as more and more companies are looking to outsource some of their work in order to save on labour costs. While this trend is worrying employees overseas, it could be good news for South African IT companies, which may reap the benefits of this offshore outsourcing surge.
This is according to Org Geldenhuys, a director of Pretoria-based recruitment house, Abacus Recruitment.
"According to a recent report in a contracting publication in the UK, HP`s Services Chief, Ann Livermore, stated that the company is `trying to move everything we can offshore`. This decision apparently has the backing of CEO Carly Fiorina.
"It appears companies want to cut prices, and costs, as much as they can by using cheap labour. Labour is generally not cheap in Western countries, so an increasing number of overseas companies seem poised to look to emerging markets to provide them with what they want, including outsourcing software development."
Geldenhuys said that local companies should leverage off this trend and find ways to make these companies "know that they are available to do the work, and have the skills at the right prices".
He said if SA got a slice of this new business trend it could benefit IT workers and IT contractors in particular.
According to Gartner, spending on offshore outsourcing in the US will rise from $6.6 billion in 2002 to $15 billion in 2007. That`s quite a rise. There is likely to be a similar rise in Europe - but from a lower base. Currently, according to the latest statistics, only 8% of UK companies are currently offshore outsourcing.
This compares to 30% of companies - according to Gartner - which are considering offshore outsourcing in the States. "While this augers badly for US IT workers and outsourcing companies, it is potentially good news for our economy. We might not be the cheapest when it comes to labour, but on the hi-tech front our labour prices are going to be extremely competitive compared to the dollar and the pound, or euro."
According to an online publication, UK Contractor, the downturn in the IT industry has been a lengthy one. "This," said Geldenhuys, "is now prompting companies to look at costs wherever they can. If offshore outsourcing is far less expensive - and it is workable - clever companies will consider it. Clever companies in SA will recognise this and will make a play for a slice of the cake. But it must also be remembered that if the economy improves in the UK and the US, companies might start reconsidering their decisions. But if they are too far down the road with offshore outsourcing it is not going be that easy for them to pull out. You can`t suddenly cut off medium- and long-term projects or relocate development teams and technical resources across continents with the sweep of a pen, a couple of phone calls or hastily convened boardroom meetings.
"Our contracting industry - certainly in IT - has not been looking that rosy lately as companies increasingly opt for full-time staff at the expense of contractors. But if there are an increasing number of outsourced projects coming in from overseas companies, local companies that get involved might opt to ramp up their staff count to handle this additional work by hiring contractors."
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