State of the Market

[sreed]

Well as we all know offshoring has been around for ages (decades) but if it is ramping up maybe then, just maybe, we should stop with the insistence on remote roles and start sending out the message that on site is best for projects\deliverables etc? And I include myself in this as someone who has relished the remote working of recent years.

I don’t think that’ll make any difference. If a role can be done at a desk at home, creating an artificial need for that role to attend the office isn’t going to change the direction of movement on this. Plus, like the WPP quote above, once the difference in salary costs exceeds a certain threshold (eg: UK vs India or Philippines), there’s no stopping it.

The only things that may slow the tide (won’t reverse it) is government regulation (and I’m not using it as a pejorative) eg: specifying that companies in supply chains fulfilling govt/public contracts must be UK based, or properly thought out protectionist data protection laws which disallow companies processing UK personal data from doing it overseas, etc. The US has been doing the former for quite some time, the EU is ramping up in this space as well.

[tsmith]

IT has been in slump for 20 months now, started middle of 2022. What industry is that linked in thread about, have they only started to really feel it now?

Thats to be expected from the 18 month delay from interest rates hikes to really hit the economy, but the IT contract market saw the effect after just 6 months.

Although 18 months ago interest rates were only 3%, so thats what the wider economy is feeling at the moment, just 3% interest rates, it might still require another six to nine months before the economy feels the full effect of 5% interest rates.

I don’t think that’ll make any difference. If a role can be done at a desk at home, creating an artificial need for that role to attend the office isn’t going to change the direction of movement on this. Plus, like the WPP quote above, once the difference in salary costs exceeds a certain threshold (eg: UK vs India or Philippines), there’s no stopping it.

The only things that may slow the tide (won’t reverse it) is government regulation (and I’m not using it as a pejorative) eg: specifying that companies in supply chains fulfilling govt/public contracts must be UK based, or properly thought out protectionist data protection laws which disallow companies processing UK personal data from doing it overseas, etc. The US has been doing the former for quite some time, the EU is ramping up in this space as well.

Ha yes IR35 make UK workers even more expensive right

and then surprise - good old Rishi helping out Infosys - his Father in Laws Indian offshorers with nice juicy gov contracts...

"Infosys – in which Murty reportedly has shares worth around £610 million – has been put on an “approved list” of suppliers in line for £750m of public sector contracts, according to The Mirror.

The newspaper also reports that the Indian firm is named on a £250m NHS contract, as well as a £562.5m contract from the Financial Conduct Authority for IT services, according to the investigative Substack newsletter Democracy for Sale."

https://www.thenational.scot/news/24...ernment-money/

[edison]

I don’t think that’ll make any difference. If a role can be done at a desk at home, creating an artificial need for that role to attend the office isn’t going to change the direction of movement on this. Plus, like the WPP quote above, once the difference in salary costs exceeds a certain threshold (eg: UK vs India or Philippines), there’s no stopping it.

The only things that may slow the tide (won’t reverse it) is government regulation (and I’m not using it as a pejorative) eg: specifying that companies in supply chains fulfilling govt/public contracts must be UK based, or properly thought out protectionist data protection laws which disallow companies processing UK personal data from doing it overseas, etc. The US has been doing the former for quite some time, the EU is ramping up in this space as well.

I'll go further and say that the trend in outsourcing and offshoring will accelerate. India still has huge potential for outsourcing all kinds of services. The likes of Vietnam are growing rapidly. I worked at a large UK accountancy firm last year and they are piloting outsourcing more basic accounting services to the likes of Pakistan. Many large firms in the UK outsource a lot of finance department admin work to Eastern Europe.

There will be hundreds of millions of people in developing countries who are relatively well educated and speak English who will be able to take what used to be well paid jobs.

What's especially worse for Britain is we will struggle to create new highly paid jobs to replace those lost. We used to be world class in high value add sectors like aerospace, pharmaceuticals etc but those sectors are not growing like they used to. And the City with all the associated highly paid jobs in professional services like law seem to be in relative decline and it's hard to see what will revive it long term.

And I haven't even mentioned the ongoing challenges with making Brexit work or further threats from AI.

[tsmith]

IT has been in slump for 20 months now, started middle of 2022. What industry is that linked in thread about, have they only started to really feel it now?

Thats to be expected from the 18 month delay from interest rates hikes to really hit the economy, but the IT contract market saw the effect after just 6 months.

Although 18 months ago interest rates were only 3%, so thats what the wider economy is feeling at the moment, just 3% interest rates, it might still require another six to nine months before the economy feels the full effect of 5% interest rates.

I'll go further and say that the trend in outsourcing and offshoring will accelerate. India still has huge potential for outsourcing all kinds of services. The likes of Vietnam are growing rapidly. I worked at a large UK accountancy firm last year and they are piloting outsourcing more basic accounting services to the likes of Pakistan. Many large firms in the UK outsource a lot of finance department admin work to Eastern Europe.

There will be hundreds of millions of people in developing countries who are relatively well educated and speak English who will be able to take what used to be well paid jobs.

What's especially worse for Britain is we will struggle to create new highly paid jobs to replace those lost. We used to be world class in high value add sectors like aerospace, pharmaceuticals etc but those sectors are not growing like they used to. And the City with all the associated highly paid jobs in professional services like law seem to be in relative decline and it's hard to see what will revive it long term.

And I haven't even mentioned the ongoing challenges with making Brexit work or further threats from AI.

Agreed. The "AI" piece to me is not so much about "sexy innovation" as much as how do we use tech to "dumb down" the skill needed to perform this work so it can be done offshore cheaper with a lower skill worker

If you do a text search on the WPP prelim doc below theres 12 mentions of AI and 15 mentions of offshoring

https://www.wpp.com/-/media/project/...eb-2023-v2.pdf

Also this

"WPP will invest an annual £250mn in the sorts of AI technology that many analysts believe poses a threat to the sector, with the potential to replace many of the functions of an advertising agency in creating, planning and buying marketing for big brands. AI could also allow more companies to carry out their own marketing functions.

Mark Read, chief executive of WPP, said it was “too early” to say whether these moves would lead to more or fewer jobs in the sector"

Ha if its "too early" you're investing 250 mil to experiment? - the analysts state in the article it has the potential to replace a bunch of the agencies functions

https://www.ft.com/content/f649b685-...d-760ffbc53172

[gables]

I don’t think that’ll make any difference. If a role can be done at a desk at home, creating an artificial need for that role to attend the office isn’t going to change the direction of movement on this. Plus, like the WPP quote above, once the difference in salary costs exceeds a certain threshold (eg: UK vs India or Philippines), there’s no stopping it.

The only things that may slow the tide (won’t reverse it) is government regulation (and I’m not using it as a pejorative) eg: specifying that companies in supply chains fulfilling govt/public contracts must be UK based, or properly thought out protectionist data protection laws which disallow companies processing UK personal data from doing it overseas, etc. The US has been doing the former for quite some time, the EU is ramping up in this space as well.

I wasn't looking to create an artificial need but one that shows better delivery, more efficient etc despite the increase in the person cost. But I think you're correct, I was more mulling over the point that an open goal is given when we say "remote only" as this obviously suggests remote can be offshore... which as an aside makes a mockery of one of the reasons for politicians insisting a return to the office to support local businesses.

[edison]

Agreed. The "AI" piece to me is not so much about "sexy innovation" as much as how do we use tech to "dumb down" the skill needed to perform this work so it can be done offshore cheaper with a lower skill worker

If you do a text search on the WPP prelim doc below theres 12 mentions of AI and 15 mentions of offshoring

I saw a great example of this the other day.

A senior person in an in house Marketing department was showing how an AI image generator was used to create a mood board for an advertising campaign. The kind of thing it might have taken a creative agency designer a day or two to mock up was done in minutes.

The Marketeer acknowledged it wasn't perfect but importantly, it was quick, good enough and very cheap.

[tsmith]

I saw a great example of this the other day.

A senior person in an in house Marketing department was showing how an AI image generator was used to create a mood board for an advertising campaign. The kind of thing it might have taken a creative agency designer a day or two to mock up was done in minutes.

The Marketeer acknowledged it wasn't perfect but importantly, it was quick, good enough and very cheap.

Yes exactly. Its already here. This is the kind of stuff the likes of WPP will be plowing that 250 mil into.

https://www.adcreative.ai/

https://www.youtube.com/watch?v=d0G5en3ZS4s

Has a database of 150million ad creatives - as the guy in the vid says - 'so we know what works'

----

Also see - Full list of functionality Google Ads has removed/made worse in order to make more money off advertisers, while actively making the platform worse

https://www.reddit.com/r/PPC/comment...oogle_ads_has/

and "13 Ways Google Has Taken Away Control Over Ad Spend"

"The main issue with Google’s updates over the past 5 years is that collectively, they take a lot of control and visibility over ad spend away from advertisers. From changing the definition of “exact” a few years ago, to aggressively pushing auto-applied recommendations, it seems clear that Google is broadening its control over what happens within accounts, slowly shifting the balance of power away from users."

"PPC is never going to go back to how it was in the “good old days”. Every ad platform from LinkedIn to TikTok is rolling out their own proprietary smart bidding and targeting system"

https://lunio.ai/blog/paid-search/go...trol-ad-spend/

[Fraidycat]

I was more mulling over the point that an open goal is given when we say "remote only" as this obviously suggests remote can be offshore...

I think pretty much everything IT related that could of gone offshore has gone already. Only work that companies explicitly don't want to send offshore is done in the the UK these days, even though they could of moved those roles offshore as well many years ago if they had wanted to. And the move to remote work really wont change that, they will do it even if you are in working the office, make redundancies and can contracts.

[tsmith]

I think pretty much everything IT related that could of gone offshore has gone already. Only work that companies explicitly don't want to send offshore is done in the the UK these days, even though they could of moved those roles offshore as well many years ago if they had wanted to. And the move to remote work really wont change that, they will do it even if you are in working the office, make redundancies and can contracts.

Where do you get that sense from?

Its all down to wage arbitrage at the end of the day. As demand in a location rises so does the wages right - I heard ages ago something along the lines that Indian offshore companies that are good theyve got more expensive and therefore not that much different to 1st world country wages

Backed up by what the FT says here - Narrowing pay gaps are reducing competitive advantage for traditional destinations

“Maybe now the new trend is offshoring from higher-wage emerging markets to lower-wage ones”

https://www.ft.com/content/258213ac-...9-0971bffac109

Regardless of who does the work and where - If you can dumb down the skill level required to perform a task with AI/ML etc then youre staring down the barrel of increasing amounts of work becoming unskilled - which is bad news for most in IT

[Fraidycat]

If you can dumb down the skill level required to perform a task with AI/ML etc then youre staring down the barrel of increasing amounts of work becoming unskilled - which is bad news for most in IT

I think we still have 10 to 25 years before AI is going reach the level to replace intelligent engineers. Probably wont be these LLMs that make stuff up when they don't know the answer. It is going to need some much better algos than LLMs. At the moment they just help with grunt boilerplate work..
But it is going to happen at some point in the next few decades. Luckily i will be retired by then, but if was under 30 or 40 i would be more scared.

For any industries where every things don't have to be perfect down to the last byte these LLMs seem to be good enough already. Generating Images and Video, answering tech support emails...