IT services: Why cheaper isn't always better

September 02, 2015 14:25
Talent shortage has pushed up wages of IT workers in Hong Kong, prompting some clients to outsource work to mainland China rather than using local IT suppliers. Photo: Bloomberg

Employee remuneration takes up a big chunk of the spending of IT service providers. As the industry suffers a shortage of qualified personnel, existing talent has to be paid high wages.

"A group of people left [the industry] following the dotcom bust in 2000. And then another batch of people are gone during the financial crisis in 2008 when lots of companies slashed their IT budgets," Jacky Yiu, co-founder of IT services firm Mouxidea, told EJ Insight.

This has led to salaries jumping for the available workers. 

"We are talking about a monthly salary of HK$20,000-30,000 to hire someone with two to three years of experience," says Yiu.

With the same money, it is possible to hire five to ten programmers in China.

Given this situation, companies in Hong Kong, particularly small and medium-sized firms, are increasingly opting for IT providers in the mainland.

But Yiu warned that while the mainland alternatives may be cheaper on the surface, they don't measure up in terms of value for money.

Some problems in IT systems are hard to detect immediately, such as those related to data security.

In this respect, having a mainland service provider could prove to be a handicap.

In Hong Kong, local IT service providers tend to think longer term, taking steps to ensure smooth functioning of the system even if traffic volume multiples. Mainland providers probably won't.

But Yiu admits that customers don't share the same views, and that they often seek out cheaper mainland options.

"I met customers who would rather hire five mainland suppliers to do the job rather than paying  the sum to one local IT firm," he said.

That said, many firms are taking precaution by hiring local IT firms as consultants, or gate-keepers to oversee and quality-check projects outsourced to mainland suppliers.

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EJ Insight writer