Memorandum submitted by Intellect
BACKGROUND AND
INTRODUCTION
Intellect is the UK trade association for the
IT, telecoms and electronics industries. Its members account for
over 80% of these markets and include blue-chip multinationals
as well as early stage technology companies. These industries
together generate around 10% of UK GDP and 15% of UK trade.
Intellect welcomes the opportunity to provide
input a year on from the last inquiry. The following paper provides
an update on the views of Intellect member companies on continuing
trade and investment opportunities with India. All of the issues
raised in Intellect's original submission remain current concerns
in relation to trade with India. Intellect's original submission
is attached below for ease of reference.
Alongside the issues Intellect raised a year
ago, a number of new factors have become important relating to
the UK's trade and investment opportunities with India. These
issues relate to a number of the conclusions that the committee
made last year, and are discussed below.
1. Deeper analysis of impact of India on
UK economy
In its original submission Intellect argued
that the UK Government needed to undertake research on the impact
of trade with India, in order to counteract misconceptions about
the effect of outsourcing on UK jobs and manufacturing. The existence
of these misconceptions was one of the committee's conclusions
from its initial report, and ties in with the lack of knowledge
about the Indian economy that the Committee identified.
This is still a serious issue for Intellect's
members, and the situation has not changed since the Committee's
initial report. A lack of objective data, which would need to
be collated by the Government prevents a full and honest assessment
of India's impact on the UK economy and prevents industry tackling
the myths surrounding trade with India.
Further, it is the view of Intellect's members
that there needs to be detailed research undertaken to allow the
UK to properly exploit the opportunities that trade with India
presents. To date any analysis on this topic has been relatively
general and simple, and has tended to focus on big business, software
and call centres. Intellect encourages the Government to undertake
more comprehensive studies on a regular basis that look at market
segments. For example:
— By vertical/industry (eg the huge
healthcare and pharmaceuticals opportunity)
— By socio-economic group
— By segment of the public sectors
To move the debate on, and engage more people,
the opportunity needs to be fully discussed, and like most good
strategies, some choices need to be made about where the UK believe
the greatest opportunities for UK-India collaboration are. Policymakers
and business leaders need to ask what is it that the UK and India
are uniquely (or at least competitively) advantaged to do together.
This applies not just in the technology industry, but across the
UK economy, and is an area where the Government has an important
role to play.
2. Skills
Skills shortages within the UK technology industry
are well reported. Part of the solution to this problem is creating
an understanding of the need to use foreign resources. The use
of offshore skills is generally reported negatively; this leads
to a missed opportunity to share information, innovation and proven
training. The image of India providing low-cost labour is beginning
to change but while this remains the prevailing view, the UK will
not benefit from the transfer of skills and knowledge between
companies, universities or countries. Greater links between UK
and Indian educational institutions would allow greater cultural
understanding as well as skills, training, knowledge and innovation
sharing.
One of the drivers of the skills shortage in
the UK is the negative image of offshoring, especially to countries
like India. This issue not only creates a negative image of the
services side of technology, especially around call centres, but
more importantly gives the impression that there will be no jobs
in the UK in this sector and discourages people to take up training,
degrees or jobs in technology. It is important that this issue
is addressed; this would benefit not only the technology industry
of the UK but the economy as a whole. Both government and industry
have a role to play in addressing this issue.
3. Promoting the benefits of intelligent
outsourcing and offshoring
For many years UK companies have been offshoring
and outsourcing to India. The financial services industry, as
an example, has been seen to use India as a call centre base,
often causing negative press and customer service reports. Although
many of these initial issues have been addressed, the negative
legacy remains. Promotion of the benefits of outsourcing and offshoring,
and their positive impact on the UK economy, is central to addressing
this problem.
As highlighted by the Committee's first report,
the perception is that India is a venue for low cost labour. It
is, however, of far greater value to the UK technology industry
than purely this benefit. In particular, the UK should exploit
the development of "knowledge process outsourcing" in
India as well as low-end business process outsourcing. If the
UK can be seen to be leading the push towards collaborative working,
offshoring would not be considered as just having negative impacts
on the UK but bringing back new and innovative opportunities.
The Government has a central role to play in
promoting the benefits of offshoring and outsourcing. As the committee
concluded in its first report, it is important the public agencies
providing support in relation to trade with India work in an integrated
and effective way to assist UK businesses. The UK should not be
afraid to highlight the importance of India to our economy, and
the added value the UK derives from outsourcing and offshoring
with India. The UK technology industry is at the leading edge
of innovation worldwide; in order to maintain this we must embrace
and promote practices that have allowed us to reach this position.
This includes the use of India as a location for offshoring and
outsourcing.
CONCLUSION
As well as Intellect's initial views on trade
with India contained in its submission to the Committee last year,
three further issues have arisen that Intellect believes the Committee
should consider.
— A lack of objective, segmented, detailed
data about the impact of India on the UK economy, and in particular
the technology industry.
— The role the negative view of offshoring
and the Indian economy generally plays in the skills shortage
in the technology industry.
— The need to promote intelligent offshoring
and outsourcing as highly beneficial to the UK economy, in particular
in order to maintain the UK's technology industry as a global
leader.
It is Intellect's view that Government has a
significant role to play in addressing, or helping industry to
address, all of the above problems.
NEXT STEPS
Intellect looks forward to discussing these
issues in greater depth with relevant government departments,
agencies and other stakeholders with a view to developing appropriate
strategies that reflect the dynamism of the technology industry.
May 2007
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