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Will outsourcing be a victim of the credit crunch

Outsourcing and the Credit crunch – will reality prevail?

So we are told that IT heads are keeping the faith in outsourcing (survey computer week) despite the sight of bedraggled refinery workers picketing outside factory gates carrying placards with ‘British Jobs for British Workers’. A slight whiff of fear is evident in the Outsource market as the implications of what these workers were saying quickly sunk in. What they were complaining about was not just about jobs being given to others but the way it was being done – using labour arbitrage – i.e. cheap labour in a situation not too dissimilar to the ‘globalisation’ of the IT services market. This is where executives scour the world to save a few cents on labour cost and when the advantage is gone move onto the next cheap site of well disciplined labour. Globalisation in this context meaning the ability to transfer work without hindrance to the area that is at that moment the cheapest – then moving on. Surfing the world to where there exists a compliant government to ensure the unions do not get out of hand and rock the economic boat and get in the way of more profit.

I think it is interesting that already attention is starting to switch from India as a supplier of commodity services for example to countries such as the Ukraine. This trend partially as a result of increased labour cost in India where top level graduates are not putting up with low wages in call centres for handling routine service calls from the UK. Wage inflation, currency movement, and intense competition for the low end commodity services is driving out the advantage they once had. What they will find is that the train moves on – just as it did in the manufacturing industry some years back – their initiatives to attempt to move away from commodity is a sign of this.

Keeping faith with globalisation in outsourcing or off-shoring means carrying on the illusion of creating better organisations and delivering illusionary savings by shipping work to low cost areas – deskilling the local workforce and removing opportunities for entrants in the IT professions. The refinery workers are reflecting this and they are waking up to what the notion of globalisation really means – it is not abstract but has real consequences – particularly in periods of economic stress. They are resisting and although we may disagree with some of the xenophobia – they are shouting out that they are stakeholders in our society every bit as important as managers and executives who assume so much control over their lives and livelihoods.

Royston

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