Mark Kobayashi-Hillary. February 2004
Stephen Timms is the UK Minister of State for Energy, E-Commerce and Postal Services. Last week, he addressed over eight hundred of the leading players in the Indian technology industry at the opening ceremony for the annual NASSCOM conference in Mumbai, India.
The Indian delegates were tense as Timms took his place at the lectern. The US federal government recently announced that it would no longer allow subcontracted work to be performed offshore. Though federal contracts make up less than 2 per cent of the work being outsourced to India, there is a clear warning message to the advocates of free trade. After all, this is an election year.
By the end of his address, Timms was the favourite politician of every Indian CEO in the vast Oberoi hotel; immediately elevated to a political pedestal in a nation that loves to eulogise its past and present leaders.
Timms was forthright in his statements. He said: “Your industry is a flagship, not just for India, but for the world.” When he addressed the delicate subject of free trade and the less-than-free policies of the US federal government he said: “In the UK we practice what we preach. We are not going to put up any barriers of protectionism. We know that investment from India will help the UK economy.”
This brought a wave of spontaneous applause and a sigh of relief from the audience, though Timms was not saying anything new. The UK government has made its position on offshoring clear several times in the past, but here was a senior member of the UK government speaking in India and promising that there will be no protectionism. It was a powerful message and the British delegates in the audience had to be restrained from waving union flags and launching into a Last Night of the Proms chorus.
Stephen Timms is well-placed to judge this industry and the offshoring phenomenon. His career background is in technology, working with firms such as Logica and Ovum Holway. In addition, approximately one-third of the residents of his constituency in East Ham trace their family roots to South Asia. If any minister is going to see through the often distorted picture of offshore outsourcing as a business practice then he should.
I met with Stephen Timms the day after his speech and asked him about the government attitude toward offshore outsourcing and what can be done for those who are concerned about job losses in the UK. He said: “We see the development of these partnerships with India as an important asset for UK firms and the UK economy. However, there are many concerns about outsourcing.
There are people who feel there are threats on the horizon, so the DTI has been bringing people together from industry and the trade unions to investigate this. There is a consensus from our research that clearly indicates protectionism is not the right way forward for the UK.”
One of the main points Timms has highlighted when countering those who talk up the ‘stampede of jobs’ offshore is the unemployment rate in the UK. The Office for National Statistics just announced a jobless rate of 4.9 per cent, which is the lowest since records began in 1984.
Timms commented: “Clearly, where there are people who lose their jobs as a result of outsourcing then that is a very serious problem and we have a responsibility as a government to ensure help is provided to get those people back to work as quickly as possible. We are not taking a completely hands-off approach to this issue at all. The government has an obligation to be supportive, but we do not want to undermine the potential contribution to UK competitiveness.
The UK trade unions have mounted several vocal protests in the last year with UNIFI staging anti-offshoring Christmas carol sessions and the CWU pink elephant touring UK call centres. However, Timms believes that the union movement is starting to take a more pragmatic view of outsourcing in general.
He said: “Connect has created a very good deal with BT. There is now recognition that there are gains for the UK economy and that means gains for union members. It is very clear to the trade unions who have taken part in the DTI investigation that they don’t think protectionism is the right way forward.”
Even if the unions are starting to accept that the world of IT and IT enabled services requires a global vision then those affected by job cuts and the media in general often play into the hands of those who fear outsourcing. In the first instance, Timms is determined to ensure that government services are available for those affected by offshoring. He said: “Where there is someone who faces the threat of unemployment, they need to know that services from the government do exist. The government is now far more proactive in helping people to find work – with serious tailored advice for the individual, not the old-style job clubs.”
The unions are generally working on long-term moves to upskill their members where there is a danger of their role being moved offshore. Timms acknowledges that this is a good strategic move for union members and individuals alike. He commented: “The other side of this argument is that we have to move up the value chain as an economy. That requires serious investment in skills by industry and the government. We published our skills strategy last summer and it has been widely supported. The recent vote on university top-up fees and how we are going to fund the expansion of universities in future is going forward.”
These comments on raising the level of skills available in the UK workforce echo those of commentators who predict that jobs in the knowledge-economy will become more complex. Those of us in the IT industry know this all too well as skills learned one year may be declining in value the next. The emphasis for the government is on achieving a highly educated workforce that can compete globally on local knowledge, quality and innovation – not cost.
The recent debate on university funding is therefore very closely linked to the trade policies where the DTI is focused. Timms believes that there is not yet a general understanding of the changing global economy and the need for an increased supply of highly skilled young employees and entrepreneurs.
Timms even managed a dig at the opposition education policy when he told me: “The Conservative party talks of our ambition to get half of all young adults through a university education as wildly overambitious. The reality is, we have to have people staying in education or else we will not be successful in the globalised economy we are in. There is a need to look at not just academic education, but also vocational degrees as part of this move towards education excellence in the UK.”
Despite the potential benefits for the UK, much of the media coverage on offshoring has focused on the short-term job losses. This has affected the view of many in the IT industry and while no can deny that job losses are the result of some offshore deals, to focus on this alone misses the bigger picture. Timms explained: “People do sometimes get a distorted view of what is really going on. The media always fasten onto exceptional events and attach a great deal of importance to them. That is what people are interested in and this is what the media reflects.”
There are some interesting facts that are not so widely commented on. Timms said: “What we are seeing at the moment is call centre employment in the UK continuing to increase while also there is some outsourcing to India. No one knows exactly how this will pan out over the next few years, but the DTI has commissioned research into the call centre industry and this should be ready next month. It is clear that in some cases companies need local knowledge and others are finding fantastic opportunities from using call centres outside the UK. There is of course also some offshoring coming to the UK and we are benefiting from that. This is another reason why the last thing we want in the UK is protectionism.”
The pain of job losses cannot be denied and this is often the effect of an offshore programme, however as Stephen Timms has identified, there is a bigger picture that everyone in the IT industry needs to be aware of. The creation of a global knowledge economy means that skills can be sought wherever they exist, not just by location or price.
Some Indian outsourcing vendors now cost more than local players because of their vast experience and expertise in outsourcing. Offshoring is no longer a game of wage arbitrage between the developed and developing nations of the world; it is a process of seeking the best quality of service. Organisations are considering the best way they can supply services to their clients at the best price, including the UK government, and with companies such as Tata Consultancy Services winning UK contracts politicians such as Stephen Timms really are ensuring they practice what they preach.
“I wish to thank David Coupe, Chairman and Yash Rishi, Managing Director of Call ICCL for sponsoring my trip to attend the Nasscom Conference”
© Mark Kobayashi-Hillary 2004