BREXIT: the impact on UK businesses from an IT outsourcing perspective
IT Service Providers in the UK cater for a wide range of industries including government and service industries. The UK is a critical market for outsourcing and depending on how Brexit plays out it could have a huge impact on UK businesses and what they need from their IT services. This article will discuss three possible effects of Brexit and the change they’ll create between UK businesses and their IT Outsourcing company.
Diminish talent pool
Currently, it is uncertain the effect Brexit will have on the freedom of movement. If labour movement from Europe into Britain becomes restricted it could cause a skill shortage of IT experts in the UK. This smaller pool of talent will have two effects on UK businesses:
- An increased focus on automation process. As the talent market in the UK might dry up, business in the Up are looking towards getting fully compliant with cloud-based computer models and investing in an automation process. By investing heavily in these two aspects of business they are reducing the amount of talent the need to employ in the future on site.
- Drive-up wages of skilled IT professionals. The lack of expertly trained IT professional entering the UK means that those IT professionals operating in the country are likely to receive a higher wage. This could force British companies to outsource to near-shore and off-shore locations as it will be more cost-effective and there will still be talent entering from freedom of movement.
It must be noted, however; one very apparent aspect of Brexit is currency risk. This has devalued the pound making it weaker against other currencies which will make outsourcing from Britain more expensive. As a consequence, many analysts believe UK IT outsourcers that can provide onsite support are a better position to win contracts.
Create a domestic boom in security and data protection
The British government’s role in data protection IT based legislation has been lax and has mainly relied on Brussels to write the law in regard to data and computers. With the separation of the UK from the EU, Britain may be considered a “third-party” non-EU country. Due to this, it could face more complicated procedures and data protection and data handling. This change could create a domestic surge for outsourcers who deal with cloud security and data-transfers that are experts in their field. IT outsourcers who can remain fully compliant with EU data protection law and process the admin in an efficient and fast manner will have a competitive advantage.
One of the reasons London is popular as a tech gateway into Europe is due to network effects. London has attracted a lot of fintech companies as it has great financial institutions, all the niche industries a tech company could want, freedom of movement for the talent pool and European funding for start-ups. This made it the ideal site for a start-up not only because of the existing infrastructure but because of the other tech companies located there.
Brexit might hit start-ups the hardest as they might no longer have access to expert staff, the single market or European funding. Tech start-ups may choose other countries to build their business in, and like Dublin or Amsterdam. While other companies may choose to relocate to get access to the single market.
This will have network effects on the IT outsourcing prospects in Britain as a whole. It will become a second city, a lower prospect for Tech companies while a new tech haven forms in Europe. This will be felt a slow, long-term effect of Brexit as there are no cities that currently offer the infrastructure London has created over the last decade. The lack of appeal to new companies will have them build a new tech haven in Europe.
This isn’t all bad for fledgling companies, the devalued pound means that there are new untapped markets of business in the UK from eastern European countries that can afford British services easier. Tech-starts would also be more attracted to bigger computer companies to buy into and partner with due to the shorter gap between the pound and the dollar. This means there may be a different kind of start-up emerging that can exploit these market conditions and create a new niche that will need onsite technical support and the cloud.
Brexit poses as many opportunities as it does risks for UK based IT outsourcers. If outsourcers adapt to emerging trends and exploit the changes in the market, such as the demand of automated software and processes and IT services that deal with EU regulation changes, as well as changing their services to meet UK business demands, it is entirely possible to benefit from Brexit.