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Ovum: Offshore services hit the IT mainstream

"Ovum Holway forecasts that offshore sector revenues generated in the UK are set to more than double by 2006 to over £1bn – and that’s against the backdrop of a UK software and IT services market that’s currently struggling to grow at all. We’re not just talking about offshore software development here. These companies are already into systems integration, remote managed services and even BPO."

"Ovum Holway warns that the leading offshore players should not be underestimated. We are in no doubt that one of today’s leading offshore players will make it into the global IT Top Ten by the end of the decade. They will get there by a combination of organic growth and acquisition – and European companies will certainly be in their sights. "

"This new research also forecasts that perhaps 20,000-25,000 jobs in the UK IT industry will be lost over the next few years as a direct result of work moving offshore. The effects will be felt most by the UK’s 300,000 software professionals. If things can be done more cheaply in other countries, the work will inevitably migrate. This is a long-term trend, and governments and unions will find it difficult to stem the tide."

http://www.ovum.com/go/content/017398.htm

Just me (Sir to you)
Wednesday, March 19, 2003

One thing I think that everyone misses is that "offshore" companies don't have to be foreign.  They can be in any place with a low cost of living.  A lot of people in college experiment with low cost co-op living, which turn out to be very efficient for basic living expenses (and even shared luxuries like cable.)  Some even go on to experiment with ecovillages, which are just places that attempt to be self-sustainable.

People who do this tell me that technology can lower costs of living.  The resources of wealthy countries can be used to lower costs.  One big problem has always been that you cut yourself off from culture, because often ecovillages are in remote regions.  However, technology is improving communication with the outside, and deals with Amtrak and fuel technologies can make travel sustainable and common.

Obviously, this doesn't help the person with 2 children, whose entire social structure depends on a big city.  Even I'd go nuts, since I live in the heart of a lovely city and like "big culture."  But this can become a good choice for people who can do this, and they'll be easily competitive with places like India.

Tj
Wednesday, March 19, 2003

Oh come on, don't tell me you guys are goinf to belive another one of those gartner type companies,....

Prakash S
Wednesday, March 19, 2003

I think island countries and special economic zones would be the best way to harness the benefits of "best programmer wins" with the full benefits of having everyone in the same city where all that brain share works together.

I am not sure if Sealand and a few VPNs is the way to do it though. Because all in all existing governments have been pretty resistant to such ideas. Their way of making this a policy is to insist that if you do business with their nationals.. you are expected to follow all of their national's original government's rules.

So let's say you set up a server in Sealand, does that mean you can have 60 people work and pay no income and corporate tax by logging into that server? No. You would have to make sure these 60 move to countries that won't collect income tax or have high living costs. This goes for the company owner and all employees.

Your best bet is to open an out-sourced programming shop in places like in the caribbean while ensuring that your programming and support service is sold in a way into a taxable country in a way that prevents corporate or personal income taxes.

But in the end your trouble will almost certainly be less beneficial than to just open shop in the States as RedHat or Microsoft would--no matter how ideal you are. Because most governments are reasonable conductive to suggestions to reduce corporate or personal taxes when you are out to keep their citizens employed.  I bet it is a very very rare case where you can actually assert to yourself that the trouble you go to will actually enable your wealth to grow faster and stronger.

-- David

Li-fan Chen
Wednesday, March 19, 2003

Ovum, Gartner and all the rest derive substantial revenue from offshore outsourcers. It's in their interests to talk it up.

Second point, most of those analyst companies are full of dead-beat 2nd-raters with connections to big vendor companies. I've never seen anything original from them.

3
Wednesday, March 19, 2003

This is nothing new. Although I am sure there are some American developers who feel that these issues, such as, offshoring and foreign labor replacement programs are only happening in their country.

Multi-national corporations are evil. They are systematically taking over industry after industry: farming, fishing, retail, and the list goes on and on and on...

Until more people get involved in the political process within their countries (i.e. strikes, protests, voting, etc.) this trend will continue. Why? Because multi-national firms have bought many of the government officials who make the rules.

For those of you who live in the U.S. -- remember ABSCAM? Several Congressman were caught on video taking cash payments. None this guys were convicted and I believe all of them got re-elected!

One Programmer's Opinion
Wednesday, March 19, 2003

Even if you believe (and rightly so IMHO) that these types of outfits are usualy just churing out overpriced and not too expertly concocted lulabies, still sometimes the blind monkey hits the tree.
The report sounds quite in line with current trends and observations. The extrapolations do not strike me as unreasonable.
But hey what do I know. Maybe europe is safe from the Offshore wave since their programmers are "so much superior" than the rest of the worlds'. Lucky for the continentals, the have their national languages that are not so common as English in the offshore scene,  but UK ...

Just me (Sir to you)
Thursday, March 20, 2003

---"Multi-national corporations are evil"-----

No, they are no more evil than any other corporation or individual employer.

The first problem is that they manage to escape control. They are large enough to blackmail governments whereas your Mom and Pop organization has to do what it's told.

Secondly because of their size and geographical spread they aren't even stimulated to be socially responsible (remember that Adam Smith in the "Wealth of Nations" stated that acting morally was necessary for the magic of individual self-interest to produce general prosperity).

The old lady collecting her pension in a holiday home in Florida doesn't consciously kill hundreds of children in Africa by cutting off their water in order to get a few more cents to send her grandaughter through college. She probably hasn't the least idea that she even has shares in the water company through her pension fund, or that the water company has taken over the contract to supply water to some African state or shanty town. When the exploiter had his mansion next to the factory at least he could see the misery, and there would be a fair chance he would do something about it, if only out of enlightened self-interest.

To move a little closer to topic it does seem a little hypocritcal for programmers working in shrink-wrapped software to complain about their jobs going abroad when for the last 15 years the applications they have been producing have been taking away jobs regardless of frontiers.

Stephen Jones
Thursday, March 20, 2003

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