UNUnited Nations Economic Commission for Europe

Press Release

[Index]      


International outsourcing reshapes the world ICT industry, creating opportunities, but also arousing fears


Geneva, 25 October 2004 - The major force moving the world industry of information and communication technology (ICT) in the post-bubble era is the spread of international outsourcing. For companies in emerging market countries to benefit from this and other market trends, governments have a fundamental role to play. These were the major conclusions of the Seminar “Fostering Internet Enterprise Development by Governments and by Large Companies through Subcontracting”, which took place in Brussels, Belgium, on 5 October 2004. It was organized by the United Nations Economic Commission for Europe (UNECE) and by its Team of Specialists on Internet Enterprise Development (TSIED).

International outsourcing of ICT services means that companies (generally from developed market economy countries) shift part of the process of production of these services to other countries that combine lower wages with well-qualified human resources (engineers, programmers, IT technicians, etc.). The countries that supply these services may be located far away from the home country of the outsourcing company (off-shoring) or relatively close (near-shoring).

The move towards international outsourcing in the ICT services industry is changing the geography of the world ICT industry, similarly to what happened in manufacturing decades ago. In ICT services, this process dates from a few years, but it is growing very quickly. Moreover, surveys with ICT companies in North America and Western Europe indicate that it will accelerate in the near future. This raises fears in industrialized countries that they will lose a large number of high-skill jobs without qualified job creation elsewhere to compensate. Nevertheless, available estimates of job losses in North America and Western Europe due to international outsourcing of ICT services (although they vary considerably) indicate that they seem to be small if compared to total employment.

The by far largest vendor of internationally outsourced ICT services is India. However, recently other countries have started entering the market, such as China and Russia. Outsourcing companies are at present diversifying their international service supplier base, which creates opportunities for new companies and countries to enter the international ICT outsourcing the market. In the UNECE region, this includes particularly the countries of Eastern Europe and the Commonwealth of Independent States (CIS). However, succeeding in this highly competitive and dynamic market requires a well targeted strategy, building international reputation and creating business gradually by taking into account the size and qualification of the domestic labour pool.

Governments of emerging market countries have a crucial role to play not only in assisting their companies benefit from existing and arising market opportunities, but also more generally in fostering domestic Internet enterprise development. This includes setting the general framework conditions, creating a competitive environment (including in the provision of ICT goods and services), as well as adopting a well-targeted national e-strategy. The latter comprises implementing a well-designed e-government programme, which acts as a catalyser for widespread ICT uptake by business and the population at large. In turn, reaching this goal requires broadening the access of citizens and companies to ICTs (and particularly Internet) and to qualify them for the use of the new technologies.

Countries in Eastern Europe are striving to put in place these conditions that foster Internet enterprise development. Estonia is an exemplary case of how a middle-income country can be capable of adopting new technologies very quickly and intensively through a combination of well-designed policies for the ICT sector, the early adoption of an effective national e-strategy, providing multiple incentives for businesses and citizens to use new technologies, an efficient e-government and the intensive provision of ICT training to the population. The country’s experience was presented in the key-note address of the Seminar, delivered by Ms. Signe Ratso, Deputy State Secretary of the Ministry of Economic Affairs and Communications of Estonia.

The Seminar was attended by government officials, ICT company executives and academics from western and eastern Europe, North America and the CIS. They debated actively with presenters the issues raised by the growing trends in international ICT outsourcing and by government action involving new technologies.

In his concluding remarks, Mr. George Kowalski, Director of the Industrial Restructuring, Energy and Enterprise Development of UNECE, stated: “Emerging countries of Eastern Europe and the CIS have valuable human resources that they can use in order to tap opportunities of the growing international ICT outsourcing market. This can generate benefits for both these and developed market economy countries. At the same time, the governments of emerging market countries have a fundamental role to play in fostering national Internet enterprise development. If requested, the UNECE can assist them in this endeavour.”

“This Seminar highlighted several potential areas of future work for the TSIED. We can accomplish our goal of transferring knowledge to where it's needed –the countries of Eastern Europe and the CIS– from where it exists today –countries that have succeeded in fostering Internet enterprise development. To do so, we will rely on the high level of international expertise that is available today and on the lessons learned from experienced economies”, said Mr. Patrick Gannon, Chairman of the TSIED and President and CEO of OASIS (Organization for the Advancement of Structured Information Standards).

For further information on the Seminar event, please consult the web page of the TSIED (www.unece.org/ie/wp8/tsied.htm), or contact Mr. Rolf Traeger at [email protected] or at telephone number +41 (0) 22 917 5771.


Ref. ECE/IREEDD/04/P08