Create ‘Scots Bangalore’ to entice major outsourcing
SOURCE: The Herald, UK
DATE: July 1st, 2008
ARTICLE
Scotland has a great opportunity to harness its expertise in the financial, energy, and life sciences sectors to become a leading player in the global outsourcing market – but it must develop a joined-up strategy before this window of opportunity closes.
This is the view of Andrew Rigby, one of the UK’s leading legal experts in the global outsourcing and technology sectors, who sees an opportunity to boost Scotland’s annual gross domestic product of about £82bn by billions of pounds by creating a “Scottish Bangalore”. The Indian city of Bangalore has prospered hugely from outsourcing by companies around the globe.
Rigby, who has advised big global investment banks on major outsourcing deals and joined Scottish law firm Brodies as a partner last November after moving back to Scotland from London, has pulled together a think-tank in an attempt to ensure Scotland seizes the opportunity.
This group includes Scottish Government officials, economic development and inward investment agency executives, and leading business figures, and Rigby says politicians across the main parties are supportive.
He believes passionately that, while Scotland is recognised as a significant player in the call centre industry, the nation must move up the value chain and become a major player in the global “business process outsourcing” and even more sophisticated “knowledge process outsourcing” arenas.But Rigby, speaking exclusively to The Herald, highlighted concerns that the likes of Vietnam, Morocco, Sri Lanka, Jamaica, Chile, Senegal and Wales are figuring more prominently than Scotland on some independently-researched tables of leading and up-and-coming global outsourcing destinations.
In the fast-emerging knowledge process outsourcing market, Rigby highlights the potential for Scotland to use its expertise in financial services to become a global centre for the equity research work on which investment banks in the likes of London or the US base their investment decisions.
Rigby also points to an opportunity for Scotland to use its life sciences acumen to research drugs or aspects of genetics for big pharmaceuticals companies.
He also highlights the growing importance of Scotland’s expertise in energy, including renewable technologies as well as oil and gas, as the world faces up to the reality of finite supplies of some natural resources.
He notes the likes of US bank Citigroup and France’s BNP Paribas are already doing significant business process outsourcing work in Scotland for fund management companies.
However, he believes Scotland must persuade big global providers of outsourced services to set up in the country and also encourage the development of home-grown players in this sector to grab the opportunity which this fast-growing market presents.
In this regard, he points to Indian giant Tata Consult ancy Services’ decision to locate in the English Midlands as a missed opportunity for Scotland.
Rigby sees potential to entice the big global outsourcing sector players to Scotland using enterprise zone tax breaks and possibly offshore tax relief arrangements.
He highlights potential for Scotland to do much more than it is in economic terms by comparing its population of slightly more than five million and GDP of £82bn with Singapore’s 4.6 million people and GDP of $228bn (£114bn). He notes the north-west of England manages GDP of £110bn with a population of 6.73 million and the Republic of Ireland produces economic output of $180bn (£90bn) with 4.11 million people.
Rigby cites figures from the National Outsourcing Association projecting that the business process outsourcing market, which was worth $154bn in 2006 according to management consultant McKinsey, will be worth $323bn in 2011. He also pointed to a forecast, by industry expert NelsonHall, that the business process outsourcing market will be worth $450bn per annum by 2012.
Rigby also pointed to a projection from accountancy firm KPMG that the knowledge process outsourcing market will be worth $19bn in 2011, and research company Gartner’s calculation that the financial services sector spent £493bn on services in 2007.
He added: “There is a huge amount of money in the sector. We do £82bn (of GDP). If we could only get £3bn, that is quite a significant chunk of money.”
Rigby sees potential for Scotland to win outsourcing work from “onshore, near-shore and offshore” markets.
He said: “Onshore, there are huge amounts of financial services companies in London we could provide knowledge-based services for. Near-shore, Germany, France and Spain have big financial centres or big pharmaceuticals companies wanting R&D, and of course everyone is interested in energy sectors at the moment. We have established skills in all of those (sectors).”
Rigby added: “On an offshore basis, the Americans do actually send a lot of stuff to India but I think, at the knowledge end, the protection of intellectual property requirement, they would be much happier to offshore to somewhere like Scotland than to somewhere like China or India, which have debatable intellectual property protection regimes.”
He has a vision of large-scale technology outsourcing parks in Scotland which would be home to large providers of outsourced services, and small and medium-sized businesses looking to develop in this sector perhaps by competing as a group for major contracts from the private sector at home or abroad or from government.
Rigby believes information and communications technology companies could also locate on these parks, speeding up infrastructure provision, with representatives of government, economic development agency Scottish Enterprise, and inward investment agency Scottish Development International also present.
He believes such a “campus” would foster sharing of ideas.
He sees potential for Scottish financial services companies to create a fund which would invest in the development of providers of outsourced services.
Rigby cited the more embedded nature of business and knowledge process outsourcing centres, compared with highly mobile call centres.
He cited Scotland’s economic and political stability, workforce skills including languages, and tax regime as other selling points, and noted the lower cost of having data centres in colder places.
Rigby highlighted the ease with which Scotland, given world time zones, could service both Asian and US companies.
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