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The Impact of Offshoring on IT Skills in BelgiumProf. dr. Carlos De BackerUniversiteit Antwerpen
Offshoring and UnemploymentIZA Discussion Paper 2805 – May 2007
UK skills gap fuels offshoringOutsource Magazine August 2010
Het einde van offshoring is nabijComputable maart 2010
Offshoring is bad for IT skillsCIO Jury July 2009
Shortage of IT skills - India Must Consider Offshore Outsourcing
Gartner – Linda Cohen
Outsourcing maakt ICT-organisatie innovatiever
Computable oktober 2010
Offshoring Opinions
Outsourcing - Insourcing
BPO: Outsourcing of back office operations (e.g. Legal (LPO), Human resources (HRO)...)
Business Process Outsourcing (BPO)
Information Technology Outsourcing ITO)
ITO: Outsourcing of Information Technology
Offshoring
Offshoring: The shifting of service work to a distant nation
NearshoringNearshoring: shifting of service work to a neighboring country
Captive CenterCaptive center: companies set up their own, wholly-owned facility for software development, IT support, back-office data processing…
Selection Criteria by CIOs
Criteria %Political stability 64 %
Low labour cost 58 %
High level of education 48 %
Quality of IT and communications infrastructure
47 %
Language skills 43 %
Availability of talent 41 %
Macroeconomic stability 37 %
Quality of intellectual property regime 27 %
Tax regime 22 %
Source: PWC - Offshoring in the Financial services industry: Risks and Rewards
A.T. Kearney: Ranking of Offshoring Countries
Financial attractiveness Quality of education and availability of skilled workers
Political and economic stability
IT Offshoring Countries
India (6.9)China (6.6)Malaysia (6.1)Thailand (6)Brazil (5.9)Indonesia (5.9)Chile (5.8)Philippines (5.8)Bulgaria (5.8)Mexico (5.7)
(Source: A.T. Kearney)
Nearshoring Countries for Western Europe
Bulgaria (5.8)Czech (5.6)Egypt (5.6)Estonia (5.6)Poland (5.6)Hungary (5.5)Romania (5.3)Russia (5.2)Israel (5.2)Ukraine (4.9)
A.T. Kearney
CIOs: Why offshoring?
Lack of skilled IT staff Focus on Core Business Globalization trend: Footprint in new economy
Access to innovations Reduce costs
Salary Cost
India (annual salaries)Developer: 320.000 Rs (€5.200)Senior developer: 520.000 Rs (€8.500)Project manager: 1.000.000 Rs (€16.375)
Source: PayScale
Belgium (monthly salaries)Developer: €3.250Senior developer: €4.000 Project manager: €4.500
Source: DataNews
Hidden Offshoring Costs
Vendor selection processContract negotiation and managementSetting up the HW/SW environmentCommunication costsCultural differencesCosts for skilled project managers Legal issuesLayoffs and retention of key people...
CIOs: Offshoring Risks
Risk %
Finding/attracting people of the right quality 39 %
Deteriorating quality of service 31 %
Cultural difference between home and host market
30 %
Retention of top employees in offshore markets 29 %
Rising wages 23 %
Political and regulatory risks in offshore location 22 %
Changes to taxation 21 %
Cost overruns 17 %
Security of intellectual property/data 14 %
Source: PWC - Offshoring in the Financial services industry: Risks and Rewards
Home Consultant: So, today is the checkpoint for the designs, status should be on 90% completed, meaning everything’s done and waiting for final review. Are you finished?Offshore Consultant: Yes, I put the status on 90% completedHome Consultant: Ok, let’s have a quick look at the document. Well… the document is basically empty? How can you put it on 90% completed?Offshore Consultant: Yes, document is empty – but it’s all in my head!
Offshoring Skills and Services
Call Centers: inbound outboundtelemarketinghelpdesktechnical supportemailchat...
Offshoring Skills and Services
Software development:Conversion projectsWebsite developmentApplication developmentReport buildingTestingSoftware maintenance...
Be Realistic!
!Wanted! Long term relationship
!Wanted! Large projects
92.4
6.4
1.0 0.2
SMEs in Belgium (Source: Eurostat)
MicroSmallMediumLarge
This is Belgium!
Offshoring Market
(Only) large enterprises will have access to resources offered by offshoring companies
Micro and small enterprises will use services provided by the home ICT market.
What Large Enterprises Need
High level multicultural project leaders with great analytical...
... and communication skills
Unemployment?
Unemployment?
The estimations of labour demand equations for 58 manufacturing industries and 35 service industries fail to reveal a substantial impact of the offshoring intensities on total employment in these industries.
Federal Planning Bureau – January 2009 page 28
The World is Flat
End QuoteOutsourcing should not be about cutting out pennies, it should be about growing your business.
