Skills shortage driving offshoring: Westpac CIO

Westpac Banking Group’s CIO Clive Whincup today claimed the bank looks offshore for IT labour because there “simply aren’t enough people” in Australia with the right skills for certain roles.

Speaking to a group of young IT professionals at an Australian Computer Society event this morning, Whincup defended Westpac’s recent decisions to send IT jobs offshore to meet the demand for technology skills.

Westpac is in the midst of a five year, $2 billion Strategic Investment Program (SIP) to upgrade its core IT systems. The program is due for completion by 2014.

In March, the bank outsourced 119 software development and system maintenance jobs to Indian companies Tata Consultancy Services, Wipro and Infosys as well as IBM, in a move that drew fire from the Finance Sector Union.

Whincup said Westpac had “no option but to tap into large resource pools which are not geographically local” for the transformation program although not all people who do “coding and testing will be provided by outsourced providers.”

“We have to do this [offshore] because we have a shortage of skills. The paradox is that because we are doing it and because the media and some elements of society are fixed with the fact that it’s happening for cost reasons, it’s actually becoming a self-fulfilling prophecy.

“People are forming the view that all of the [IT] jobs are going offshore, therefore there are no jobs in Australia, therefore I am not going to put my son or daughter in a technology-related degree course.

“That’s the logic that we have to cut off – there’s a shortage of skills, therefore we are going internationally. Jobs are not going offshore, activities are going offshore because there is not enough supply within the local market for those activities to be undertaken locally.”

Whincup said IT professionals have to get used to working with global supply chains, understand that it [offshoring] is a necessity and don’t allow it to become a reason for people to not enter the industry.

“If you think of industries like manufacturing, this happened a long time ago,” he said. “You have to have a global supply chain if you are in the car business for example. In other words, you don’t source all the parts locally, you source some of them locally and other remotely.”

Salary gap to become less relevant

Whincup also believes that the gap between IT wages in Australia and India will slowly start to become less of an issue in the future.

“In the past there was a very strong view that the driver [for offshoring] is cost and that view persists in the media today,” he said. “It’s simply a question of labour arbitrage, that is, people in India earn less than people in Australia.

“That is a fact but with every passing year, it becomes less relevant because salaries are growing in India much more rapidly than they are growing in Australia and at some point, they will reach parity,” he said.

Follow CIO Australia on Twitter and Like us on Facebook… Twitter: @CIO_Australia, Facebook: CIO Australia, or take part in the CIO conversation on LinkedIn: CIO Australia