Outsourcing with a difference

As the millennium looms ever closer and the skills shortage worsens, the number of companies looking abroad for their IT expertise grows. India, where the education system is good and labour cheap, is a popular source of new staff to plug the gaps. It's an understandable knee-jerk reaction: if you can't get the staff at home, ship them in from abroad.

But is this the only way of gaining access to skilled Y2K programmers? It's certainly an attractive option for the workers themselves. Lateral Connections, a UK-based recruitment agency, has been finding Indian IT experts for British companies for some time. Nigel Woods, a director of the company, said: "India contains a huge pool of very high level skills. The students are not necessarily better educated - there's just more of them. India has about 200 million graduates and the pay in their own country is low. In Europe they can get some serious money."

It may be serious money to them, but it's an added bonus for European companies that they are a lot cheaper to employ than their domestic equivalents.

But it's not just India that's gaining attention. South Africa is also becoming a resource pool for companies desperate for IT staff. JM Recruitment Consultancy, which boasts NatWest, Thomas Cook and Merrill Lynch among its client list, claims Cobol skills taught to South African programmers are much saught after by companies tackling the millennium bug.

Conrad Hills, senior partner at JM, said: "The South African IT market is a few years behind, and a lot of South Africans are being taught at University how to program COBOL whereas in Britain its C or C++."

Less stringent work permit rules also make it easier for South African graduates to emigrate to Britain for short periods of time. "It's a very attractive prospect for IT staff to come to Europe at the moment. The South African economy is up the creek as the Rand has fallen through the floor, so by moving to Europe they can improve their standard of living no end," he said.

However, Hills added that Britain is "not being invaded". Instead, more and more companies are sending code off-site to be converted. "To a large extent it's because the staff are cheaper."

Salaries in India are a fraction of those in Europe - including those paid to staff who have moved here.

Offshore outsourcing also stops companies from going through the labourious process of obtaining work permits for IT staff. "Most investment banks don't like getting work permits for a low level techie. So what is happening, mainly in retail and insurance, is that the code is being sent to Indian software firms who do all the work.

"It's just a question of rewriting the code, they don't really need to know the company or know the user for that," Hills added.

British telco BT takes its Indian operations very seriously. Seven years ago, Mahindra BT was formed after BT bought a 40 per cent share in one of India's leading software houses, Bharti. In 1995, BT set up its first Indian office in New Delhi; this was followed in 1997 with a data satellite and VSAT voice facility in Bangalore. The Indian subsidiary is used as a software code development house; much of BT's Y2K date conversions have been carried out there.

So first class tickets to Heathrow are not always necessary. Exporting code outside Europe remains a cheaper and more efficient alternative.