UK cannot ignore offshore outsourcing

Economic pressures will force three-quarters of British enterprises to adopt some form of offshore outsourcing within two years, say industry watchers.

Gartner is predicting that the offshore outsourcing market will grow by 40 per cent this year, with 75 per cent of large and medium sized firms considering such initiatives by 2004.

The analyst said that the majority of UK outsourcing will go to Indian players, such as Wipro.

With an established skills base, close language ties and a rising number of local offices, Indian outsourcers are "head and shoulders" above other competitors, according to Ian Marriot, research director at Gartner.

"By putting in local testing capabilities, these firms are able to provide the cost savings associated with offshore outsourcing, with the feel of a local company," he said.

Early attempts to outsource work, such as year 2000 coding, ran into problems. Different time zones and physical separation made communications difficult and hampered projects.

"People are a lot more confident about outsourcing now," explained Marriot. "What started with simple coding work has evolved into call centres and business process outsourcing."

He added that mid-sized companies attracted by the cost saving potential of offshore deals may be tempted by the burgeoning growth in firms closer to home in eastern Europe.

But public sector employers may find it more difficult to go offshore than private sector businesses, warned Tim Couldrick, a partner at law firm Tarlo Lyons.

"As well as an innate protective instinct to preserve British jobs, public sector bodies will face resistance from unions," he said.

Couldrick drew a comparison to BT, where plans to open a 2,200 seat call centre in India resulted in the threat of strike action.