Security to overtake labour as offshoring issue in 2005

By Sarah Stokely

From The Beer Files, 22 November 2004

In 2005, security and privacy concerns would become the key concern guiding the choice of countries as outsourcing destinations, overtaking people issues, according to a senior Gartner analyst.

Gartner Group vice president and IT services analyst, Craig Baty , said that security, would overtake the current preoccupation with “human capital issues” such as job losses or displacement. While Australia was well placed to address such concerns, Baty flagged two potential issues – Government policies relating to sensitive information and encryption; and our employment and labour laws.

Australia needs to jump on the offshoring bandwagon if we’re to get our share of a market tipped to be worth more than $50 billion by 2007, according to Baty.

While Australia was already “a net winner” in the offshore services game, Government interception risks and our employment and labour laws would impede our desirability as an global IT services provider, Baty told attendees of Gartner’s Symposium in Sydney last week.

Calling on the Federal Government to do more to promote Australia as a global services destination, Baty said it was hypocritical to criticise offshoring when as a nation we export more IT services than we import.

“Australia is not making enough noise about our capabilities. It is quite hypocritical for some elements in Australia to be treating offshoring in such a negative and ill-informed manner. Half of our Government is saying the concept is not right.”

Baty said Government agencies such as Invest Australia have been doing a good job in promoting the financial services space, but it was not enough. “Australia is a good or low risk option as an offshoring destination and well positioned to increase its share of the offshoring pie. But we’re just not selling ourselves – we need a holistic approach,” he said.

Australia would benefit from following New Zealand’s lead with its Outsource NZ campaign, said Baty. The NZ government initiative promotes NZ as an offshoring destination to businesses in the UK and the US.

Baty’s call comes as the offshoring market grows – and becomes more global in focus. Offshoring will represent up to 10 percent of global IT services spend by 2008 – up from 2 to 3 percent, Baty predicted. It was also moving towards a globalised service approach, said Baty. “In a few years time people will evaluate the vendor – the country won’t matter.”

With around 80 to 95 percent of the market, India remained the clear leader in the offshoring game, with China “snapping at its heels”, said Baty. Australia was lower ranked with a sound, low risk profile as a potential offshore destination. But the relative cost of using Australia as on offshore destination, along with merely “fair” government support, were both factors, which reduced its ranking, said Baty.

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