Offshoring
by Jackie Randles
When Minolta published its IT Student Poll in The Australian in January 2004, it found that Australian IT students are becoming increasingly pessimistic about career prospects, with only three in ten feeling confident that technology jobs have promising potential.
IT students have good reason to think the technology industry is dramatically less secure than it was just a few years ago.
IBM, the global IT provider responsible for delivering most of Telstra’s IT services, has recently announced plans to move 450 Telstra jobs offshore to India, provoking a rare show of unity between Treasurer Peter Costello and unions who have publicly warned the telco against such a move.
The Commonwealth Public Sector Union (CPSU) has vowed to fight Telstra’s offshoring plans and is lobbying hard to keep the issue on the public agenda. But with IBM one of the biggest IT players on the global arena, Australia has little chance of curbing an international trend towards offshoring that is practised by a growing number of multinational companies.
With three of Australia’s four largest banks rumoured to be close to finalising the first in a series of projects to move entire back offices offshore alongside IT functions in, The Bulletin’s Max Walsh predicts that it soon won't be just IT workers feeling the pressure. People working across all knowledge-based activities including financial services, communications, health, education, architecture, the law, and the media may also be affected by the offshoring trend sooner than they think.
In January this year, The Wall Street Journal published an article about a leaked internal IBM memo that described plans to shift several thousand programming jobs overseas, including embarrassing details about a suggested human resources script to be used when informing employees that they were out of a job.
"Do not be transparent regarding the purpose/intent," it said, “the terms ‘Onshore’ and ‘Offshore’ should never be used," and “anything written to employees should first be ‘sanitised’ by human resources staff.”
The Computerworld website lists several big-name US companies with established or planned offshore outsourcing projects including IBM, Hewlett-Packard, Oracle, Time Warner, Disney, Siebel, Microsoft, Yahoo, MasterCard, Google, Accenture, CNN, Target, Bank of America and Intel. The website also cites recent research from the Sand Hill Group which has found that more than eight out often software companies in the US will be exporting work offshore this year or the year after.
Maryfran Johnson, editor in chief of Computerworld, says that while successful offshore projects may save companies money, hidden costs range from underestimating transition costs and additional travel expenses to security concerns, rising overseas labour costs and IT governance problems. What troubles her most is the growing self-censorship around this topic and its inevitable stifling effect on honest information exchange.
“At a time when more companies are gaining experience – both good and bad - with offshore firms and outsourcing contracts, fewer companies are going to be willing to share those experiences.”
In the UK, recent news that more than half of all calls made to national rail inquiries will soon be answered by call centre staff in India by the end of the year was met with anger when a five-year contract worth £100m was awarded to BT and call centre specialist Ventura in February.
National Rail Inquiries' telephone number is Britain's busiest, receiving about 150,000 calls a day. With the future of more than 500 call centre jobs in jeopardy, unions are currently lobbying the European Commission to get involved in the increasingly bitter fight to stop European jobs leaving the region.
Back in Australia, Telstra has denied reports from the CPSU that it would outsource further jobs to an overseas provider, with human resource and payroll applications rumoured to be earmarked for transition. While the Democrats, the Greens and the ALP are calling for the Commonwealth to exercise its 51% share of Telstra to ensure that Australian jobs remain in Australia, the offshoring trend continues loom on the horizon.
The Australian Computer Society (ACS) recently conducted a report into offshoring and found that most of the businesses jumping onto the offshoring band wagon are, not surprisingly, motivated by cost savings. However, President of the ACS IT workers' group, Edward Mandla, warns that the savings to be made by offshoring are small when compared with the loss to the community in terms of local jobs, PAYG income, repatriated profits and GDP.
Speaking on ABC Radio National’s The Buzz programme, he said that the financial benefits expected from multinational solutions are often severely undermined by large bonuses typically paid to those responsible for IT savings:
... it isn’t always the lowest cost or the multinational solution that’s right - you have to consider all the alternatives and maybe there are Australian solutions that are just as good...You start looking at it and the numbers don’t stack up.
*Transcript of The Buzz programme about Offshoring at www.abc.net.au/rn/science/buzz
discuss this articleJackie Randles was Public Affairs Manager of St James Ethics Centre and continues to be the Editor of Living Ethics.
This article was published in Living Ethics issue 55, autumn 2004
© St James Ethics Centre