Offshoring and Its Consequences for the Employment Relationship in the Service Sector

Article excerpt

This article investigates the nature and extent of offshoring by United Kingdom firms and assesses whether the practice will alter the employment relationship between labour and capital in the service industry. The work takes a critical approach to the question and explores whether the changes to the employment relationship will be comparable or fundamentally different to those experienced in the manufacturing industry in the 1980s.


The modern firm finds itself operating within a global economy with converging markets forcing many changes in company operations and strategies. This increasingly competitive global market has of late intensified international competition in what was previously assumed to be an impenetrable service sector. As a result, large corporations engaged in the delivery of services are being compelled to define and focus on core activities, whilst outsourcing less exclusive activities to overseas operators--a practice more commonly known as 'Offshoring' (Sedley & White, 2000). Deregulation and the freeing of international trade has created a further incentive for peripheral functions to be relocated in what has increasingly become low cost, highly skilled destinations in developing countries. However, it is as a result of well publicised decisions on the part of banks and other financial institutions in the United Kingdom (UK) to offshore their IT, business process and call-centre activities to India, that concerns have been raised over the future of service sector jobs in the West. Crucially, offshoring is being predicted as having a major impact on future employment, with third world countries construed as benefiting from offshoring to the detriment of millions of jobs in first-world countries. This article explores the impact of the practice of offshoring in the UK, it assesses the possible changes to key areas of service sector employment and questions whether these changes will alter the employment relationship between capital and labour in a comparable or fundamentally different way to that experienced in manufacturing industry in the mid 1980s.


The article uses data previously collected by the authors for The Work Foundation (TWF). It was part of a wider project considering the business issues associated with the adoption of offshoring in the United Kingdom. The data was gathered from interviews and background research on six companies involved in offshoring services; and 93 respondents from a survey of randomly selected large UK companies. The case studies included an international Consultancy & Professional Services Firm, a Social Primary Care Trust in the National Health Service, a multinational electronics and entertainment firm, two IT & business process outsourcing firms (A & B), and finally a UK Higher Education institution.

The cases were wide-ranging, but were considered appropriate because they represented a cross-section of UK firms from both the public and private sector who were either engaged in, or considering offshore activities. The Consultancy and Professional Services Firm was chosen because it was in the process of setting up a research team in India--this was seen as an innovative move in the area of knowledge management, and was to be used to provide secondary research support for the staff of its parent company. The firm already had an existing offshore office in India dealing with IT software development and providing HR and IT support. The social primary care trust in the NHS was regarded as appropriate because it was located in the public sector and operated large NHS Direct Call Centres in the UK. It was a [3.sup.*]-rated department chiefly servicing acute hospitals, it had a budget of 240 million [pounds sterling] and employed 2,800 staff and it provided a range of health care, as well as commissioning. Case study (3) was a multinational electronics and entertainment firm. The company, with 900 staff in Europe, sold 1. …