Foreign adventures put assets at risk

Dr Johnson said patriotism is the scoundrel's last refuge, and certainly it's hard to miss the tinge of jingoism in some recent views of offshore outsourcing.

For a prejudiced few, of course, the idea of moving jobs to a foreign workforce will never sit well, no matter the benefits and how sensitively the issue is handled. The Little Englanders needn't delay us too much - but there are issues that need to be addressed. How far should we outsource our IT functions? In which situations should they move away from the UK? And what is the wider impact of offshoring for the UK workforce?

First, many outsourcing "strategies" are anything but. The numbers are hard to come by but tales of firms suddenly coming out in favour of outsourcing are common when those firms are heading for Skid Row. Outsourcing generates cash and it's a truth universally acknowledged that company valuations are to a large extent based on emotion, so it's no surprise that many firms choose to impress analysts with commitments to "focus on core competencies", which translate as "we're outsourcing anything that moves". This isn't strategy, it's selling off the family silver.

As for the offshore question, it is clear that many of those firms that have outsourced some IT tasks have made significant cost savings. The "follow the sun" advantage of extended working hours and lower labour costs are obvious, and the volume of work moving offshore would be paltry if projects had met with dismal failure.

But in some ways the offshore case may be overstated. It is in the interests of managers who have moved projects out of the UK to publicly proclaim the success of their strategies. Quality is not just equal to the UK's but superior, they insist. Yet how much post-installation testing is that claim based on? Do firms that are so concerned about labour costs also conduct strenuous testing after projects go live? And are cost savings not offset by communications, travel and other costs that may not make it onto the offshore spreadsheet?

Process tasks and contact centres, even entire business processes, might well suit offshore outsourcing, but if business IT is about competitive advantage then surely only lovers of risk would want to outsource research and development to third parties. Giving critical tasks involving intellectual property to outsiders, who might then collaborate with your biggest rival, is an approach that is questionable to say the least.

Finally, how do we feel about sending out for IT skills when thousands of local IT workers are unemployed? There will always be a lower-priced worker - when India reaches its inevitable limit, Vietnam, China and the Philippines await - but what of staff loyalty, corporate social responsibility and the brand damage felt by firms that upset unions and users? These costs may be learned the hard way.

Also, as recent US moves to change visa controls have shown, managing offshore without a compass as to how various governments will behave in the future, could be problematic.

In the complex, political world of outsourcing there are more questions than answers. But if I were making a decision to outsource, and especially if I were pondering whether to outsource offshore, I would tread carefully.

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