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IT presence in the UK faces extinction as students shun the sector

Off-shoring continues to take its toll

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Internet Security Threat Report 2014

This month has seen the UK's aspiring Prime Minister recycling his views in his Budget Report on the requirements and funding for enhancing the training opportunities and skills to compete globally as a prelude to announcing greater investment in higher education. Some people and organisations, “speaking on behalf of the UK IT Industry”, have hitched themselves to this bandwagon in the anticipation that some of the UK Government's proposed increase in its skills and education funding will find its way to the IT industry both in funding terms and in delivering more highly trained and motivated IT professionals.

Essentially, the UK IT Industry is suffering from an image problem, failing to attract sufficient younger people to the industry. Fewer people are taking science and technology courses at University or other further education establishments. Equally, fewer graduates are attracted to the IT industry as a career.

The reasons given are varied and include vacuous comments about the IT industry's image problems, which should be addressed by the industry not the Government. These can only be rectified by the industry. However, like many industries, the UK-based IT industry suffers from the Wimbledon syndrome. They are not British but the UK has been a great place to come and base some of its activities. At the same time most founders and proprietors of small to medium size IT companies have the very legitimate dream of ultimate success as being acquired by a larger IT enterprise and living happily (well prosperously) ever after. Of the top 10 IT companies operating in the UK I can only think of two or three, which are UK domiciled and could reasonably be expected to have a concern about funding, skills and image of the UK IT industry. Most are multi-nationals who will locate or relocate to other geographies where skills may be found in greater numbers and at more competitive costs.

Some who speak for the industry claim that the moves to off shoring of both systems development and operations over the past decade have themselves been responsible for the decline in the UK IT skills base. Young people are not attracted to an industry that is seen to be steadily moving the deployment of its skills base to the Asian Continent and which does not appear to offer security or assured career prospects within the UK.

It is highly unlikely that the UK Government is able legally to offer any form of protectionism to UK IT industry: it would probably fall foul of the ubiquitous EU Competition and Trade Regulations. At best it would provide some short-term amelioration of the problem, which will continue until such time as there is a wholesale reversion to national trade protectionism. History suggest that time will come—but when? Equally, the indigenous IT Industry may be an adviser and facilitator to the UK Government in deployment of funding budgets for IT skills through the advice on channelling funding for skills and education and, perhaps, assuming some of these functions themselves.

The analogies with the motor industry merit examination, certainly for the manufacturing and operational elements of the IT industry. The UK has some small specialist niche manufacturers where price and competition are not factors. There is a willingness to pay a premium for what is perceived to be a crafted or proprietary product. Over and above that there remains some specialist component manufacturing as well as assembly of vehicles for the UK domestic market. Some of the major motor manufacturers do maintain some elements of the design and creativity aspect of development in the UK. In the IT industry this is represented by small, niche, software houses. Once they have developed a prototype or an initial installed base they are willing acquisition targets.

While I do not subscribe to the bleak assessment that “IT presence in the UK faces extinction as students shun the sector”, the IT Industry is a modern form of manufacturing industry and has to face the challenges which globalisation has brought during that time. Employment will be scaled down in the UK and, theoretically at least, in other Western European Countries, unless they operate some covert form of protectionism, which France and to a lesser extent Germany still manage to do. The IT Industry will only scale-up again in the UK, if, or when, costs of off-shoring become uncompetitive or, alternatively, the economic and political risks in the offshore environment increase.

Copyright © 2006, IT-Analysis.com

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