Offshoring in 2012 and beyond

July 2012

Offshoring debate thumbnailThis video debate looks at whether there will be a ‘hollowing out’ of UK IT staff as offshoring continues; whether specialisms could be lost and if the UK needs to change its attitude in the era of ‘follow the sun’ working. Also covered are our approach to specifying skill levels in tendering and a discussion of what the Institute’s role should be.

Participating were Elizabeth Sparrow, BCS past President; John Milner, a freelance consultant previously of Cambridge University; Karim Hyatt an interim CIO involved in software products; and Gary Nuttall, a business intelligence expert. Brian Runciman MBCS hosted.

Will there be a ‘hollowing’ out of IT in a decade or two as there will be fewer junior IT staff to develop into senior staff who can advise user organisations on strategy, architecture, vendor and customer relationship?

ES: There are two potential dangers - companies offshore without a real understanding of the input they need from IT experts to define, manage and produce strategies. There is a misguided belief for some companies that they need no IT expertise internally. There is also a danger that we try to cling onto jobs as they exist today. It has not stopped evolving. We need to be looking at the jobs for tomorrow.

KH: I’ve worked with many companies who have wanted to offshore. In every case I’ve made sure there is a core team onshore. It is extremely important that you keep even what we call low-level jobs because when dealing with a remote team it’s really important that you know what is going on, that you understand the technical concepts being worked on. If you don’t they may take you for a ride and you’ll pay over the odds - so you need someone there who understands what is going on. If companies don’t nurture and invest in these teams they will lose out later on.

JM: In many cases you’ve got to ask the very basic question: what’s it for? You’re not offshoring control of your business, but activity. Many organisations that offshore don’t think about the cultural differences. For example, some cultures don’t like to say no - so if you don’t qualify a response beyond ‘yes’ you are opening up to risks you can’t even see. So this is about relationships and how they need to work.

GN: IT is about enabling change and this often means automating things, so people are going to lose jobs. Ultimately, for example, there are no paper tape or punched card operators in the UK anymore. Roles are going to change anyway and offshoring is part of that, but it isn’t everything. This hollowing out isn’t solely due to offshoring. Some of it is purely economic, but companies are finding that although things may seem cheaper at first, the controls also add overheads. So the cost argument for offshoring is variable, but we are going to lose jobs so we need to know what new roles are coming up.

KH: IT isn’t viewed as cool as it was in the 70s and 80s. In the software product area you sometimes, for example in gaming, need extremely specialist and clever people. Real techies. They are difficult to find. If you go to India you are getting 500,000 IT graduates per year and if you go through the recruitment exercise the people are out there. So if you want a large team of developers you are more likely to be ale to do it in India than the UK.

Will UK just increase and diversify in specialism: some development is going to be very sensitive, some things need to be done face to face, and with agile methodologies it is hugely beneficial to be close to the business problem you want to solve anyway…

GN: I think one of the challenges with agile is the culture fit, the concept of it, which involves flexibility and adaptability - we found that hard, although that could have been an experience problem. In order to do things right you need to have learnt lessons from other people already - so is there a framework for that? My experience is that the agile fit has not been good.

KH: I have had the opposite experience. I think that agile has made offshoring easier. As it’s relatively new there are many companies in the UK that have not adopted agile, but as you don’t need to spec out everything and have an iterative approach it enables you to offshore in an easier manner. You don’t need massive requirements docs, just a user story.

JM: A lot of this is about looking at the way both methodologies have broadened over the years - there are many ways you can do something. Some may be more optimum than others in particular contexts, so you need to look at the approach you make for development work, then you can look at where to go for the resources to do it. The world is an option, not just your IT department. It still requires planning, risk analysis and a judgement process to set up a programme of work. But it is a question of choosing the right resource, skill and approach for each job. As we can do this on a global perspective I see this as a huge benefit. Although it maybe a bigger management challenge than it used to be.

GN: A number of my experiences have been on ‘follow the sun’ type projects, where each team involved passes on the project for development. When you turn that around the UK just becomes part of that chain. So we are talking about the threat of outsourcing software development, but it may be that we are part of doing software development for others...certainly in global organisations I’ve seen that.

ES: For me another question is where does the UK sit globally? Where are our real strengths and growth areas? Are we developing those professionals, right from the time they are school kids that can actually benefit the UK economy and have satisfying careers. There is something lacking in our public policies as a nation and perhaps our approach as professionals in developing others. We have some tremendous strengths, for example the internet of things. This is where we need to look at what the IT skills that professionals need are, and then see if we are developing those individuals rather than simply assuming that we will carry on as we have in the past. Things will not carry on as they have.

JM: It’s not so much an educational issue. If you look at the profile of higher education in the UK there is a great deal of technical training and many of the recipients are coming from countries to which we offshore. It can be around 60 per cent of students that come from overseas. So education is almost a part of the UK’s contribution - so the fact that we buy some of that expertise back doesn’t seem to me to be a huge issue.

What about the UK skills base then? If we do some ‘following the sun’ in large organisations, will it leave more management-type roles in other areas?

KH: I think that’s part of it - to effectively run remote teams - whether abroad or in Edinburgh. It doesn’t matter where people sit, so the only problem is one of time zones and that needs managing. The problem is that education of our students should include what sort of things they can expect when working with a remote team. I don’t think that is part of our education system.

GN: I think there is a more fundamental problem. I was looking at history of computing and it seems that every ten years there seems to be a major paradigm shift that no-one expected. So if you look at the lead time of getting a child into work it’s a ten- to 15-year period. We should be teaching them how to learn and critically evaluate things for themselves rather than specific disciplines in IT.  

JM: We’ve got focused on technology and lost sight of training people as managers and systems analysts and the roles to do with the framework in which technology is exploited. We should also look to train in those areas that don’t change so much in 10 to 20 years.

Will the move to teach computer science in schools help?

KH: Absolutely not because technology will move on.

Isn’t this about principles?

KH: What are they?

ES: The move to emphasise computer science in schools means taking children away from simply learning Word and so on, and will take them back to learning about the principles of IT or computing - the basic concepts that can be applied to all new technology. I think that is crucial.

We are in danger of over-emphasising the need to teach to manage and manage contracts. We don’t have enough people that are actually skilled in managing remotely. But then to say that’s where all the focus should be, that’s a danger, because we will need to develop the new industries that will come along that we haven’t even thought about. We need people that understand the principles that underpin computing. If we only develop managers I don’t think it will serve us well.

KH: We do need to respond to the possibility of hollowing out. We do need the gamut of technical skills and I don’t think that will change. The type of technical skill will change. However there is, right now, a gap of people who can understand cultures and empathise with them. It’s about understanding what’s happening in the world. I think some people are at risk of closing themselves off to what is an inevitability. We will have distributed teams - be prepared - you will need to interface productively with someone thousands of miles away.

JM: Because we are English I think we can sometimes approach this with the wrong mindset. Because English is the lingua franca, we presume everyone thinks and communicates like we do and that isn’t true. If we are going to go global we need to get into the mindset of learning about different cultures that we now work with. There is a tendency to think of offshoring hierarchically. My view is that the UK is part of a global network - a network of peers.

KH: That’s fundamental to this debate. I’ve had this experience with a highly trained Swedish group of gaming professionals and they stated that one developer in Sweden is worth three in India. But that wasn’t true and they had no basis for stating that. This is the attitude that needs to very quickly change.

Can we have a meaningful comparison of virtues of offshoring, or assess trends in it, unless we take a professional approach to HR and a more rigorous approach to specifying skill levels in tendering?

GN: I think in future contracts will go down an outcome based approach where as long as the code is produced to the required spec, does it really matter what qualifications the developer has done in the past? I use the Kwik Fit analogy - if I have my exhaust replaced I go to a specialist, they give me a price and a time. I don’t analyse the mechanic’s qualifications or a schedule of what they are doing - all I want them to do is deliver on time and on budget and that they phone me if there is a problem.

JM: There is some merit in a common language of standards so that each party’s expectations are expressed in similar ways. SFIA has quite a lot of merit in providing that. Maybe we should advocate, even sell, SFIA outside the UK with a bit more rigour. There is no doubt that frameworks like that make life a lot easier. BCS has a role back home as well in working with educators, particularly business schools to work on this mindset change.

GN: If we are going to have global standards they need to be independently audited and validated. I’ve worked with providers who claimed to be CMMI level 5, but most are at best Level 2. A company is audited to CMMI for example, but that doesn’t mean that the individuals are.

KH: I think that is an outsourcing issue. Sales teams come in with their best guys, but when you start executing you can get the guys with six months experience - but that is a management problem and you just need to be aware that it happens. CMMI for me is: can you as a company come into a Level 2 organisation and be effective? Can you work with existing processes? If the company buying the services in has to change all their processes what’s the point? It’s worth having named teams - on the contract, on the schedule. You have to have the management in place to identify the people you need.

GN: If a company has all of its people qualified to a certain level and it’s sold on that basis, do we need names on a schedule? Your experience, Karim, evidently says that it does. So that means we can’t just rely on frameworks and standards but we need something else as well.

JM: So it’s not a one-size-fits-all thing. There may be situations where it makes sense to undertake an offshore contract as a black box. There will be other situations where the scenario Karim describes will be necessary because we need a fully integrated team of resources. So a plan needs to include resources and risk and you have to go through a systematic process of choice, decision and engagement. BCS can develop generally acceptable professional standards and explaining these issues to educators can make a significant contribution.

ES: We are talking about offshoring as in British company contracting to a group overseas. But for me it is one example of a globalisation movement. People could be working for a large multinational company - so where is offshore and onshore there? There is work that can be done around techniques and standards around offshoring as it is commonly understood. Bu there is also how to work in a global setting, when perhaps the majority of your customers are not on the UK.

KH: I read a report recently that said the UK has not expanded abroad as much as others, for example the US.

Should BCS have an official position on offshoring, or a position to help with this mindset change?

GN: We shouldn’t have a position on outsourcing as that’s been around for 15 years. We should have a position on remote working - doesn’t matter whether it’s Asia or Scotland. One of the problems I’ve struggled with is the culture shift of people accepting how productive other people can be when they are not in the office - wherever it is!

KH: On the continent they have a much more insular view of working globally. One thing the UK has always been really good at is redefining and reinventing ourselves. Historically we are inventors and we need to take that spirit out there. In IT in particular that is where the growth area will be - get involved in projects, throw yourself in because it will give you a leg-up to work internationally.

JM: We need to get people to understand is not about ‘I do this to you’ it’s about joining a network. BCS is well placed with its relationship to drive that message. The steel industry is a good example of one that has changed - only 20 years ago we were a major producer and employer - and it was UK owned. In 2007 Sheffield was producing more steel than it ever had, but is was basically two guys and a computer is a shed, so the employment wasn’t there. Now Tata own most of the steel - an Indian company. So we have to learn to adapt and join the network.

KH: There is a huge demand even in India and China for experience in accessing the industrial and commercial market in the UK and Europe. Europe is seen by Asia as being largely untapped.

ES: BCS is already more of a global organisation than many realise, one in seven of our members is based overseas. We are becoming more global in outlook - and we need to develop and build upon this. I am sure we have a role in terms of professionalism and the setting of standards and we can grow this. In terms of those based in the UK I think we can help them with education policies and working with government. We can also challenge the myth that comes out in, for example Daily Mail articles, that the UK no longer needs IT professionals because it’s all moved to China and India. It undermines and undervalues the tremendous industries we have in certain sectors.

IT is changing, but it has always changed. BCS needs to be ahead of the game to serve the profession.

KH: Ironically many people in IT don’t like change.

ES: Human beings do tend to be a bit cautious about change.

KH: But of course the acceleration of change is incredible. We need to reinvent ourselves all the time.

JM: You’ve got to look at change in two ways. Some you can manage, some you just have to cope with. If it’s the type you just need to cope with, trying to manage it is doomed to failure, so you need to be able to classify it and be realistic.

Final comment

A recent joint US / UK research project showed that by 2016 750,000 jobs in finance, IT and other areas will be offshored by 2016. On the other hand CIO magazine reports that 225,000 new jobs will be created in the UK by 2015 in public and private clouds. Swings and roundabouts?

Further reading

In 2004 BCS published a position statement on offshoring followed by a book ‘A Guide to Global Sourcing - Offshore Outsourcing and Other Global Delivery Models’ and a full report ‘Offshoring - A challenge or opportunity for British IT professionals?

In 2006/7 there were two BCS Thought Leadership debates continuing this conversation: ‘The knowledge based economy - what can the UK do to avoid losing out to the Far East?’ and ‘What are the right things to do to sustain UK competitiveness in 2025?

This debate

14 May 2012
BCS HQ, Covent Garden, London Directions

Participants

  • Elizabeth Sparrow
  • John Milner
  • Karim Hyatt
  • Gary Nuttall
  • Brian Runciman (Host)