Carlos de backer the impact of offshoring on it skills - ict symposium 2010

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Carlos de backer the impact of offshoring on it skills - ict symposium 2010

  1. 1. The Impact of Offshoring on IT Skills in Belgium Prof. dr. Carlos De Backer Universiteit Antwerpen carlos.debacker@ua.ac.be
  2. 2. Offshoring and Unemployment IZA Discussion Paper 2805 – May 2007 UK skills gap fuels offshoring Outsource Magazine August 2010 Het einde van offshoring is nabij Computable maart 2010 Offshoring is bad for IT skills CIO 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
  3. 3. Outsourcing - Insourcing
  4. 4. BPO: Outsourcing of back office operations (e.g. Legal (LPO), Human resources (HRO)...) Business Process Outsourcing (BPO)
  5. 5. Information Technology Outsourcing ITO) ITO: Outsourcing of Information Technology
  6. 6. Offshoring Offshoring: The shifting of service work to a distant nation
  7. 7. Nearshoring Nearshoring: shifting of service work to a neighboring country
  8. 8. Captive Center Captive center: companies set up their own, wholly-owned facility for software development, IT support, back-office data processing…
  9. 9. 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
  10. 10. A.T. Kearney: Ranking of Offshoring Countries Financial attractiveness Quality of education and availability of skilled workers Political and economic stability
  11. 11. 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)
  12. 12. 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
  13. 13. CIOs: Why offshoring? Lack of skilled IT staff Focus on Core Business Globalization trend: Footprint in new economy Access to innovations Reduce costs
  14. 14. 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: €3.250 Senior developer: €4.000 Project manager: €4.500 Source: DataNews
  15. 15. Hidden Offshoring Costs Vendor selection process Contract negotiation and management Setting up the HW/SW environment Communication costs Cultural differences Costs for skilled project managers Legal issues Layoffs and retention of key people ...
  16. 16. 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% completed Home 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!
  17. 17. Offshoring Skills and Services Call Centers: inbound outbound telemarketing helpdesk technical support email chat ...
  18. 18. Offshoring Skills and Services Software development: Conversion projects Website development Application development Report building Testing Software maintenance ...
  19. 19. Be Realistic! !Wanted! Long term relationship !Wanted! Large projects
  20. 20. 92.4 6.41.0 0.2 SMEs in Belgium (Source: Eurostat) Micro Small Medium Large This is Belgium!
  21. 21. 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.
  22. 22. What Large Enterprises Need High level multicultural project leaders with great analytical... ... and communication skills
  23. 23. Unemployment?
  24. 24. 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
  25. 25. The World is Flat
  26. 26. End Quote Outsourcing should not be about cutting out pennies, it should be about growing your business.

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