Institute of IT professionals CEO debates onshore/offshore ratios

IITP CEO Paul Matthews responds to Capgemini's view that a high percentage of software development and testing can be done offshore

Computerworld put the Capgemini view of offshoring to Institute of IT Professionals CEO Paul Matthews, who spoke generally about the onshoring and offshoring debate.

What is your view of the 40 percent onshore/60 percent offshore ratio for the entire application life cycle that was quoted by Capgemini CEO Paul Thorley?

There’s always going to be some sort of mix in the enterprise space and that’s because you need people with specialist expertise in a particular area, but what that percentage is, is really up for debate. When you look at IRD’s systems and requirements... I think the New Zealand industry certainly has the ability to deliver on a project like that if it was given half a chance, bearing in mind that you would need experts from offshore. But I think going down to a straight 40/60 model with the purpose of offshoring to countries primarily to save on cost and expense, that’s not necessarily going to achieve the best result.

In a large contract like that, what kind of percentage do you think would be advantageous to the NZ ICT industry?

I think it’s the approach and the focus that’s important. There are two reasons why you go offshore or you bring in people from overseas. One is straight cost, and a capacity issue. The second is the expertise side. They’re quite different purposes and quite different outcomes. When you’re talking 40, 50, 60 percent outsourcing you’re really talking about the former and I would think that’s really not in the interests of New Zealanders, as a generalisation. You look at a country like New Zealand and its got a relatively small industry in the general scheme of things, you don’t need very many of those big projects to lift the capability of the industry. The more you take that offshore, the less opportunity you have for New Zealand. In terms of getting the numbers of software engineers, I think we’ve got the ability to deliver on that within New Zealand.

Thorley is saying that there is a shortage of those skills in New Zealand.

There is a shortage in terms of the numbers but that can be addressed in other ways. In terms of the actual skills and expertise you need to bring some in, but I would think that would be more at a minority level.

The ratio for onshore/offshore is even higher in favour of offshoring for software testing. The ratio is 30 onshore and 70 offshore. Look at Xero for example, they’re crying out for software testers, and paying a $15,000 sign-on bonus.

The issue we have is the shortage of people in that field. Surely we’re better to address that in the long term interests of New Zealand than just offshoring projects.

You’re saying that a New Zealand firm, or a consortium of firms, could have fulfilled that IRD contract, it didn’t need to go to a global company?

Consortium is the way to go, it would include some international input but more around the specialist side of things. It’s not a good thing to see major projects in New Zealand just go offshore.

But a government organisation might say it’s our job to get the best deal for New Zealand taxpayers. Whether that’s local or international is neither here nor there, our priority is to get this sorted and in the RFP process a global organisation came out on top.

That’s a valid point, depending on the criteria you’re using to judge that. Now often what you find in government generally, is that they have a preference for offshore firms, and that’s for valid reasons.

It comes back to that expertise thing – they look at a company that’s of a particular scale, has done similar jobs in the past and they feel it’s safer to give it to that company. But the fact is, historically, when we have had local firms and consortiums take on some of these larger projects they have been able to deliver.

It is ensuring there is an level playing field. I don’t think there are very many in the industry who are saying ‘give absolute preference to New Zealand businesss.’ What they are saying is when all else is equal, then consider the other benefits to New Zealand of using New Zealand firms.

When a big company like Capgemini comes here it opens opportunities for New Zealanders who may get work with the company, and do other things, like take part in an innovation programmes where they look for start ups to invest in and help them go global and they offer internships with local tertiary institutions?

I agree, and that’s why when you’re talking about a consortium you need to include international firms in that. Microsoft is an example, they’ve done some great things with local firms and exposed them to some international expertise and international markets.

There is a place for that and I’m not suggesting all development should go to New Zealand and we should take an insular view to the rest of the world, but it’s more a case that if we are offshoring, or we are using people and skills from outside New Zealand, that we are doing it for the right reasons.

We’re doing it to get that expertise, and experience, rather than just thinking that we’re going to save some dollars by offshoring, which inevitably ends up not being the case anyway.