Current offshoring trends are a layer-cake of overlapping ironies. In the 80s and 90s, corporations began off-shoring jobs to take advantage of better educated, increasingly skilled but lower paid work forces, primarily in Asia and South America. That provided mixed benefits for the global economy: trade increased as the incomes of offshore consumers rose, but jobs and incomes in the developed western economies began to decline. This contributed to the impact of the financial crisis because the economies of the developed countries were already weakened by the loss of jobs and income. As a result, tax revenues declined, which has forced public sector agencies to offshore more jobs to address strapped budgets instead of fulfilling one of their traditional roles as a source of local middle income employment, particularly in times of economic dislocation.
Meanwhile, the private sector has had a couple of decades to assess efficiencies. What they have discovered, through research and improved technology, is that local call-center operators may be more effective - and therefore more profitable - than offshore ones in identifying and managing customer payment problems. Manufacturers, faced with rising transportation costs due to increased energy prices are also discovering that local factories have financial advantages.
So, as the public sector, starved for revenue, sends jobs overseas, the private sector, ever desirous of greater efficiency and effectiveness, is bringing some jobs back. The lesson is that the claims of greater offshoring efficiency are frequently transitional. Corporations and governments intent on providing useful services must continue to focus on what best accomplishes that goal and not on the siren song of a magical solution based elsewhere.
Michael Kavanaugh reports in the Financial Times:
"Moves this month by Birmingham city council and Hewlett-Packard, contractor for the Department for Work and Pensions, to shift work to India have raised the hackles of trade unions amid fears of further job losses in the UK.
Ironically, the public sector’s rising interest in “offshoring” services such as call-centres and IT operations comes at a time when the private sector is reconsidering the benefits of taking support functions to lower-wage economies.
United Utilities is among recent examples of private sector companies that have reversed earlier offshoring decisions by returning call-centre work to the UK.
The decision to bring the work – which had been handled from the Philippines under contract by Accenture – back in-house has boosted employment at United’s offices in Warrington and Whitehaven in north-west England. Russ Houlden, chief financial officer, says a review of United’s debt collection strategy had prompted the move – and a recognition that local staff were best positioned to deal efficiently with customers with genuine problems in meeting their bills.
“A lot of our customers do face difficulties, and we have to work out the ‘can’t pays’ from the ‘won’t pays’,” he says.
Staff in Whitehaven rather than Manila will now be dealing with the often delicate task of dealing with indebted customers, which will involve “local people collecting from local people”, he says.
This year BT has also created several hundreds of jobs in the West Midlands though the opening of a new call-centre in Sandwell.
That investment followed a decision announced at its annual meeting two years ago that it would be moving some offshored customer support jobs from India back to the UK.
Some in the industry argue that high unemployment rates in the UK and other western economies are also helping to make domestic call-centres and outsourcing more competitive – for the time being.
High staff turnover is a “plague” in the industry – both at home and abroad. But now “individuals are more willing to stay in a customer contact centre for a year-plus”, reducing the costs of training replacements, says Peter Ryan, lead analyst at Ovum, the consultancy. Nevertheless, the cost-saving benefits of offshoring – up to 50 per cent, according to Mr Ryan – undoubtedly remain attractive for the squeezed public sector.
The large business process outsourcing companies, known as “BPOs”, are also learning how to raise their game, says Mr Ryan, matching the quality available from domestic suppliers. To meet this continuing demand, UK outsourcing specialist Capita, which generates about half of its revenue from the UK public sector, has expanded its operations in India.
Last month rival Serco – with a similar exposure to the UK public sector as Capita – agreed to pay up to £385m to buy Mumbai-based outsourcing company Intelenet, which generates three-quarters of its revenues outside the subcontinent.
Elsewhere, growth in the Philippines remains “off the scale”, Mr Ryan says, while Egypt had been another unlikely hit location until the Arab Spring revolts put clients off
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