Rightsourcing

US company Northeast Utilities announced plans to outsource its entire IT department to India this week, wreaking havoc across the company, causing top people to head for the exit and putting the business at risk from disgruntled employees. Slashdot described the move as insanity, especially if it is an attempt at encourage attrition to reduce severance costs, but this rings of insanity on a different level for me.

In the UK we have an unemployment problem, particularly in young people between the ages of 16 and 21. For one reason or another, some of them won’t follow a path through university, and even those that do will need jobs while they study to make ends meet.

Why are we not creating apprenticeship academies to develop young talent? Wouldn’t it make more sense to teach them how to satisfy the needs of industry rather than ship the work to other countries?

There are three reasons why outsourcing is a false economy.

• First, if you have ever worked with an outsourcing company you will know that the churn rate of staff is very high, your knowledge retention is very low and what seems to be a cheap resource seldom provides the expected value.

• Second, the basic argument that offshoring is cheaper is flawed. The usual rate for a software developer based in India is around £125 a day, they are often university students with limited experience and are managed by more expensive “application architects”. Managing projects at a distance is harder, so if projects overrun, lower day rates don’t necessary mean lower costs. By contrast, the salary cost of an apprentice  in the UK is under £20 a day a 16 to 19 year old and £35 a day for a 19 to 21 year old.

• Third, there are wider social and economic arguments for apprenticeship. After finishing an apprenticeship, the majority of apprentices (85%) will stay in employment, with two-thirds (64%) staying with the same employer. Source: Evaluation of Apprenticeships for Learners, BIS, May 2012. A third (32%) of all former apprentices had received a promotion within 12 months of finishing, and of those in work, three-quarters  reported taking on more responsibility in their job. Source: Evaluation of Apprenticeships for Learners, BIS, May 2012. Employers think that qualified apprentices are 15% more employable than those with other qualifications. Source: ICM Employers Research, 2013

There is huge demand for skills in ecommerce, mobile, master data management and cloud computing and some of the biggest players in these markets are based on open source. UK government policy is to use open source solutions in the public sector unless there is a compelling reason to go elsewhere. Just this week, the government announced plans to stimulate further open source procurement in NHS IT.

If apprenticeship academies are the question, perhaps sponsorship by the powerhouses of open source – companies like Magento, Talend, Bonitasoft and Ubuntu - may be part of the answer.

I did not go to university. I did an indentured apprenticeship in mechanical engineering and I still regularly call on the skills learned during that part of my life. The bigger lesson it taught me is that we need to give young people more than one route to a career if we want to give them – and us - the chance of a bright future.

I am looking to put together a team of like minded and skilled people to help set up a pilot for rightsourcing in the UK. If you want to get involved then get in touch with me at andi.mcburnie@ajloman.com. Because this is something we should be doing.