Counting the casualties of 'outsourcing creep'

Twenty-eight companies have outsourced more than 50,000 jobs serving UK customers to India over the past two years, with many more lining up to cut costs in 2004.

Offshore outsourcing of call centre work is expected to grow by 25 per cent over the next five years as employers scramble to save up to 40 per cent on UK-based costs.

Recent announcements include national rail enquiries' plans to move 600 jobs to India as part of cost cutting measures. Just last Tuesday, Britain's biggest insurer, Aviva, announced it would move about 2,350 British jobs to India.

Who's doing what?

Aviva's was the latest move by the UK's financial services industry to export jobs to low-cost countries.

A report by CWU showed who else in the sector has been doing the moving...

• The Abbey National building society established an IT development presence in Bangalore in September 2002, employing 100 skilled IT staff to provide software development, maintenance, testing and support services.
• American Express first outsourced work to India in 1994. It now has 4,000 employees there, handling financial accounting, data management, information analysis and control, administration, recruiting and staffing and payroll services.
• Citibank employs 3,000 people in Bombay and Chennai. They handle wholesale banking, retail banking products, billing services, customer care, transaction processing, payroll services and accounting.
• Goldman Sachs announced in July that it is set to create 250 administrative and IT jobs in India.
• HSBC first outsourced to India in 2000, and now has more than 2,000 employees in Bangalore and Hyderabad who deal with accounting transactions and transaction processing. In October, it announced plans to outsource 4,000 jobs from the UK to India, Malaysia and China within the next two and a half years.
• Lloyds TSB announced plans in October to close its call centre in Newcastle and outsource the 986 UK jobs to its centre in Hyderabad.

In other sectors featured in the report, the IT consultancy giant Accenture first outsourced work to India in 2001. It has 1,000 employees in Bombay and aims to more than double its Indian software and back office staff to 2,500 within two years.

• British Airways has 2,400 employees in Bombay who manage passenger accounting, error handling and frequent flier miles tracking for BA and other airlines.
• BT plans to create 2,200 jobs in India by 2004 but has indicated to the CWU that more than 7,000 positions could eventually be moved.
• Dell has about 3,800 employees in Bangalore and Hyderabad, supporting PC customers worldwide.
• GE has 11,000 employees in Bangalore, Gurgaon and Hyderabad who provide network support and risk management to more than 30 GE businesses globally.
• Tesco is to transfer 350 jobs to a call centre in India.

What the experts say

Global industry watcher Gartner recently warned of global job cuts in the IT industry over the next few years, but said the technology outsourcing business in India will boom despite a backlash in the United States.

The outsourcing sector grew about 60 per cent in the year to March 2003 and is projected to surge by 55 per cent to $3.6bn in the current financial year, it said.

Last year, the business process outsourcing sector accounted for about a quarter of the total revenue of the information technology sector in India.

A number of US states such as New Jersey, Maryland, Connecticut and Washington have been considering stopping outsourcing their government information technology work to other countries for fear of local job losses.

"We forecast that offshore business process outsourcing work to India will touch 13.8 billion dollars by 2007, which is 49 per cent of the total offshore technology outsourcing business," a Gartner spokesman said.

"By 2005 most large US and European enterprises will only consider external service providers that provide a global delivery model and India is a clear leader in this.

"One in 10 vendor jobs and one in 20 IT space jobs will move to developing countries from the developed ones," the spokesman added.

"But the situation is not severe and the backlash will cease to be a major issue by early 2005."

Indian Government officials and trade bodies have criticised US states for their anti-outsourcing moves. They claim such action directly contradicts the calls for greater market access and free trade which the US has long made in multilateral forums.

India's IT industry has been worried because such a ban would have a direct impact on one of its fastest growing business areas.

Whether such a ban would be tabled in the UK remains to be seen, but one thing is certain. Jobs are disappearing from the mainland to the sub-continent by the thousand and upturn or not, there will only be so much work to go around.