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Editor's Blog: Some offshoring fallacies
The UK still exports more services than it imports

By Tony Hallett

Published: Wednesday 06 September 2006

I found myself at an event last night, hosted by the BCS (British Computer Society - but you know that), entitled 'Global Outsourcing Today - GOT IT?' Naff name but interesting couple of hours.

At the end of a long day, two long-time silicon.com contributors, Dr Richard Sykes and Mark Kobayashi-Hillary (both silicon.com Agenda Setters judges this year), were at the centre of an offshoring/outsourcing debate, which also took in speakers from India's HCL, FTSE 20 company National Grid and - I'm pleased to say - an animated audience of BCS members.

Like my dinner afterwards, the evening had an Indian flavour but the debate is clearly about much more than that fascinating country and a bunch of the big brands we know about.

On the subject of services - not only IT services, let me add - Richard Sykes is never anything less than fascinating. Some stand out lines:

"Inside the M25 there is the highest concentration of non-national professionals in the world."

"There will be a split in the services market, between commodity providers and specialised providers… And you can't ride both horses. The Indian companies will come to recognise that."

I could go on. The first fact needs some context. In an age where we hear about balance of payments imbalances, the rise of China as well as India, and the general hand-wringing about British business, it should be noted the UK runs a trade surplus in services. The UK and US lead the world in this regard.

But don't think that is purely down to the City. Sure, FS is important. Only areas such as professional services (accountancy, law etc) and creative industries (old and new media, advertising) are more important, in export terms. Those professionals that come from all corners of the world to work in London, or more broadly within our lovely M25 ring road, aren't just working in banking, insurance or financial markets. They are architects, journalists, clinicians, engineers - you name it.

On the second point, about commoditisation, I'm in agreement. Not sure whether Rajeev Sawhney from HCL, a second-tier though still significant Indian ITO and BPO provider, would be. Right now, for the top Indian players, life is pretty sweet. Win those commodity contracts that are too low down the value chain or too mundane for companies in places like the UK but also sell on quality, expertise and a local, on-shore presence and knowledge in many cases. But that sweet life won't always be there.

I want to revisit Sawhney's comments on shared risk, reflected in contracts between users and outsourcers, another time. Until then, let me pass on a little learned knowledge. As with Bric - a common abbreviation these days for the developing giants Brazil, Russia, India and China - he used the acronym Switch. Now what does that stand for? Think about it:

Satyam
Wipro
Infosys
TCS
Cognizant
HCL

Richard Sykes and Mark Kobayashi-Hillary's new book, The Level Playing Field, is out soon.