Outsourcing: Impact on UK`s IT services sector and its future trend

Outsourcing : Impact on UK 's IT Services Sector and

Its Future Trend

Executive Summary

Outsourcing by companies in high-wage countries is undertaken to achieve the objectives of lower wage cost and also to access a larger talent pool in other geographical locations . Hence outsourcing assumes wider economic perspective which cannot be overlooked by high-wage level countries like UK . The outsourcing of Information Technology (IT services has recently been greatly facilitated by the advancement in the telecommunication technologies in terms of lower cost and increased digitization services of Text , figures , data

and other information Another important factor affecting outsourcing is that the IT workforce in the low wage level countries like India have enhanced their expertise in areas like system analysis and network design which is a distinct value addition for outsourcing by companies in the UK . In this context this will examine in detail the impact of this emerging trend on the IT sector of UK and the future direction of outsourcing

Introduction

Outsourcing by the IT sector in the UK is expected to play a predominant role in the periods to come as according to the predictions from Evalueserve the domestic supply of labour force is projected to grow from 27 .66 million in the year 2003 to 27 .92 million in 2010 . But during the same period the demand for labour in the country is expected to grow from 27 .66 million in 2003 to 28 .63 million in the year 2010 leaving a shortfall of about 714 ,000 workers . This shortage of labour coupled with the forces of increasing globalization will lead the UK to continue outsourcing to low cost destinations . It is estimated that by the year 2010 UK will outsource at least 110 ,200 IT services jobs which is worth YSD 4 .8 billion in monetary terms (Evalueserve

The advanced technological factors of the telecommunication sector with its lower costs and the increased opportunities for digitization of data and information have greatly facilitated many IT companies to outsource their services . In fact in to achieve a global competitiveness and improved profitability the IT companies have been made necessarily to resort to outsourcing of their services

Rationale behind the Research

With the advent of globalization the business houses all over the world are trying to expand their activities in various geographical locations wherever there is a cost advantage , just to improve their competitive strength and also to access new markets . In such a scenario the companies adopt different techniques to spread their wings like joint ventures , direct investments in emerging economies , transfer of technologies and outsourcing . Outsourcing has become one of the important tools in the hands of the IT companies for enhancing the profitability by taking advantage of the services of the expertise and skills in low wage level countries . The phenomenon of outsourcing is also facilitated by the technological advancement in the information and communication technology . However outsourcing by itself is not the only solution for the IT companies as it has...