Nearshoring & the preservation of key skills

Posted on Monday 28th May 2012 9:58

As a subject, we tend to talk about offshoring as a matter of economics first and people second. Yet there’s a third underlying factor associated with offshoring jobs, departments or business functions that has a much more fundamental effect on our economy. And that’s skills.

Improved levels of education and advances in communications technology have moved the capabilities of offshore workers far beyond the cliché of the Indian call-centre. It’s now perfectly possible to outsource pretty complex tasks, and a great many UK companies are relaxed about this trend, believing that they can keep ‘high-level’ functions, such as R&D close to home. This is a view put forward by, among others, the inventor and entrepreneur James Dyson.

But as the costs of doing business in the developing world rise in line with the continued economic development of China and India et al, and fundamental questions remain as to how the UK can stay competitive in an rapidly upskilling world, perhaps we have to think seriously about nearshoring. For many businesses it may no longer make sense for them to manage mid-level functions such as IT, operations or logistics, but the cost benefits of outsourcing overseas are no longer significantly greater than moving them to an external supplier based in the UK. The management time required to implement a nearshoring arrangement is significantly lower than it is for an equivalent offshoring project, which means that businesses won’t lose days of key personnels’ time as they jet to and fro from India.

Yet above even all this, a business that choose to nearshore rather than offshore is also playing an important role in keeping key skills alive that will be integral to our future competitiveness.

Skills are like muscles: if you stop using them they atrophy. Their effect is also cumulative, and it’s impossible to predict where they might lead you. And this is particularly so in the case of IT and particularly software development. It may seem like there’s a huge gulf between a developer rewriting a day-to-day business application, and another developing the next Android, but they share the same core skills. And the more we outsource seemingly low-level development to other countries, the more we starve our own home-grown developers of the opportunity to hone their own skills and incubate the ideas that might one day turn into the next Autonomy.

By nearshoring rather than offshoring certain services and functions UK businesses can balance their need to stay efficient while still providing opportunities for skilled workers. This stands to benefit the economy at large as the larger a pool of skilled people we have available, the better placed our businesses are to attract high value work, innovate and maintain our standing in the world economy.