1 IT Outlook 2004 Chapter 2: Globalisation of the ICT sector Section on International Sourcing OECD-Eurostat Expert Meeting on Trade-in- Services Statistics OECD April Graham Vickery and Desirée van Welsum

2 International Sourcing – Terminology The international sourcing of IT and ICT- enabled services (often referred to as ‘offshoring’) is part of the globalisation of the ICT sector, and also of other services sectors ‘Offshoring’ includes: –Insourcing: to foreign affiliates –Outsourcing: activities are contracted out to independent parties abroad But: (in- and) outsourcing can also take place domestically

3 Illustration Onshoring, Offshoring, insourcing and outsourcing IT and business process services Approximate value of worldwide activity in 2001, USD

4 But: no official statistics on international services sourcing  Look at: Exports of services  if service activities are sourced internationally, the country receiving the international in- and/or outsourcing must export services back to the country of origin Employment data Input-output tables Trade in intermediates

5 Growth of exports of other business services and computer and information services

6 This shows Some of the countries often mentioned in the outsourcing debate have experienced strong export growth (e.g. India) But, the exports of some of these countries are growing from a low base:

7 Share of reported total exports of other business services and computer and information services, 1995, 2002 (IMF BoP data)

8 However: There are discrepancies in the reported data A challenge for statisticians

9 Discrepancies: total services Difference in exports reported by India and imports reported by importers (millions USD) Total services Exports to all countries reported by India Imports from India reported by US (1) EU of which: UK Japan Canada Sum of reported imports Discrepancy i.e. Percentage of Indian exports unaccounted for by the above countries

10 Discrepancies: commercial services (excl. travel and transport) Difference in exports reported by India and imports reported by importers (millions USD) All commercial services, excl. travel and transport Exports to all countries reported by India Imports from India reported by US EU of which: UK Japan Canada Sum of reported imports Discrepancy i.e. Percentage of Indian exports unaccounted for by the above countries

11 Discrepancies: computer and information services Difference in exports reported by India and imports reported by importers (millions USD) Computer and information services Exports to all countries reported by India Imports from India reported by US EU of which: UK Japan Canada Sum of reported imports Discrepancy in total i.e. Percentage of Indian exports unaccounted for by the above countries

12 Possible explanations Reporting difficulties (definition of services and modes of delivery) Lags in implementation of BPM5 methodology Different data collection methods (difference between imports and exports surveys) and possibly recording criteria Differences in treatment of certain categories (e.g. movement of temporary workers) Operations of global firms

13 Questions How can the discrepancies be explained? Is the list of possible explanations exhaustive or are there other plausible explanations? What can be done to improve the situation –In the short term? –In the long term?