Outsourcing, cloud computing and job security

The recent troubles at RBS have brought the issue of outsourcing back into the spotlight, with some pointing a finger at the alleged lack of oversight and quality control at the bank as a result of many technical positions having been relocated overseas.

IT coming home?
Outsourcing has been a fact of life for well over a decade now, with many IT functions, particularly those at a lower level, being exported to low-cost providers.

The economic imperatives that led the first wave of outsourcing a decade ago – cost savings, flexibility, speed of deployment, innovation, time to market, quality and shared risk – remain just as relevant today. However, the nature of the process is changing.

The great rush to shift IT offshore may be over as difficulties in arm’s-length project management have become apparent. Moreover, as wages increase in traditional IT offshoring centres such as India, outfits that once sold their services primarily on price are having to move to a value-added and more proactive model in order to compete with upstarts from China, Chile and Eastern Europe, a step-change that has not yet run its course.

“More people are talking near-shoring,” confirms Holway. “There is now a sense that apprentices are in vogue again. Even the government seems to be waking up to awarding contracts only to companies who create jobs in this country. But it may be too little, too late.”

David Wilde, CIO of Essex County Council, agrees that, in the public sector at least, IT jobs are coming home, citing regulation as a factor.

“If anything, there has been in-shoring in some technical areas. Information governance and compliance is a bigger driver in this space than in the [wider] economy,” he said.

Insecure sectors: finance and public
So, if the offshoring trend really is going into reverse, do UK IT professionals feel more secure?

Seventy-four per cent of the 445 Computing readers who completed a recent survey believe their jobs are unlikely to be outsourced. However, among those respondents who felt threatened by outsourcing, about half said that this threat had grown over the past two years (figure 1).

Those most worried about the impact of outsourcing work in the financial and public sectors, in roles such as systems design and development and support, although IT managers were also more likely than average to express concern.

Of course, the offshoring of IT jobs is not the only form of outsourcing. For years now, especially in the public sector, IT personnel have been transferred wholesale to large private-sector contractors, often leaving just a core staff in place. Asked whether this is still the case at Essex County Council, Wilde presented a mixed picture.

“Yes, [jobs are being transferred] to systems integrators and core technology service providers in telecoms. There is in-house growth in business systems analysis, technical design and business intelligence though,” he explained.

The financial sector is also undergoing a period of cost cutting and consolidation following the crash of 2007. Traditionally a major employer of IT staff, the past few years have seen a haemorrhaging of jobs to cheaper locations.

A former IT manager at RBS told Computing in June: “Testing was aggressively moved offshore because the testers were cheaper and almost always computer science or engineering graduates. But the reality is that testers need to understand what they are testing from both a functional and a business perspective.”

Many working in the financial sector will be hoping that the huge reputational damage suffered by RBS following its prolonged technical failure in June might cause the banking sector to think again about the way it uses outsourcing. However, our survey reveals a continued air of gloom, with IT professionals in banking, finance and insurance twice as likely as the average to state that their job is now more at risk than it was two years ago.

Interestingly, the sector least likely to fear outsourcing is IT and telecoms, perhaps because this sector is a net beneficiary of the policies of the public and finance sectors.

The cloud transforms the job market
In many ways, cloud computing is another branch of outsourcing. The cloud automates tasks that were once performed by specialist technicians, moving from an on-premises build-and-maintain model to one based on managing services delivered by a third party.

In itself, the cloud is seen by Computing readers as less of a threat to domestic IT jobs than traditional outsourcing, with a total of eight per cent fearing its impact. However, a majority of these see the cloud as more of a threat now than it was two years ago (figure 2).

So who should be most worried by the advent of the cloud? Unlike in the responses to the outsourcing question, no particular sector or job title stood out in the survey results. We asked David Wilde for his thoughts.

“Hardware and datacentre engineers in local environments [are most at risk],” he said. “Cloud datacentres will render local server rooms obsolete. Also telephony engineers as convergence renders analogue and other standalone telephony obsolete.”

So, those technicians who feel most at home with screwdriver and multimeter in hand, who cannot adapt to a large-scale automated environment will continue to face a squeeze. But the cloud also presents opportunities for those with integration skills, especially in its private or hybrid forms (the most realistic option in most organisations). Integrating and optimising virtualised and cloud-based functions with those maintained onsite demands a variety of specialist skills, such as network design, virtualisation and systems architecture.

However, while some analysts like IDC suggest (in a Microsoft-funded paper) that the advent of the cloud will see a net creation of IT jobs, others are doubtful. Even if this turns out to be the case, the new roles are unlikely to be the sort of hands-on technical jobs that are being displaced. Rather, they will be managerial positions, data security specialists, business strategists and contract managers with legal expertise. The all-important entry route to this new world for today’s IT graduates is unclear.