Forget pros and cons of offshoring: This is the new global business reality
Thursday, August 28, 2014/
I often get asked if I am “pro-outsourcing” and whether I think that is good for Australia. In fact, I don’t consider myself either for or against offshoring; I simply think it is the new reality of the business world in which I operate.
You can adapt your business to global resourcing, or you can carefully build a strategy to bypass it. But these are the forces of capitalism at work, so one thing you cannot do is ignore it.
The Philippines is fast becoming the centre of the new business world. I don’t mean this in the sense of it being particularly innovative or that it has amazing skills that are not available elsewhere. I mean simply that a large number of businesses now do most of their critical business functions with teams in this location. The core of global business is shifting to where the talent exists at an appealing price.
Consider these facts
Telstra has around 14,000 people in the Philippines now (moving most roles from India, and some new ones from Australia). Virtually all of Jetstar, except for the planes and crew, is operated out of the Philippines. On any day of the week you’ll see big blue ANZ buses driving some of its 4000 staff around, advertising on the side showing a picture of a smiling Filipina manager enticing skilled banking staff to come and work for ANZ.
Netsuite, a US owned software product, started with five people in Manila a few years ago; the smallest office in the company, doing simple back office tasks. Now it has over 1000 staff in this location and all its other offices have become satellite sales offices to the core Manila office. Top tier accounting firms are sending more and more work to their Indian and Filipino subsidiaries. Increasingly, clients ask which portion of this work is being done in Australia, and whether a discount has been applied to allow for the 80% reduction in the cost of the work.
IBM has two buildings in Manila and two locations in regional areas and expects to have between 20,000 and 30,000 staff located there by 2015. Dell’s global product support operates mostly out of the Philippines. Almost any global brand you can name now has staff in the Philippines, and it is now the number one global location for voice (phone) customer service work, overtaking India last year. The offshore staffing industry is growing at a sustained 20% with another 200,000 roles from all over the world to be moved here in the next 12 months.
This is not a big business phenomenon – this is main-stream in the SME community. Small Australian businesses in every imaginable industry now have tens of thousands of staff in the Philippines, from construction to recruitment to technology to professional services. Many businesses start with a few roles and grow over time to eventually have more staff offshore than onshore. Although they face challenges during this transition, they often report that they can get the same skills as in Australia and that global resourcing ultimately produces a stronger and more efficient business.
A new generation of multinational startups has already begun. I have seen accounting firms built from the beginning with an optimised onshore-offshore model. I know a web development company with 35 staff and only the owner resides in Australia, to liaise with clients and do sales.
This is the biggest shift in human labour that the developed world has ever seen. My mission over recent years has been to help Australian businesses of all sizes adapt successfully to these changes.
Scott Linden Jones built several businesses in the IT industry since 2002. He is the founding adviser at Easy Offshore (www.easyoffshore.com.au), providing offshore educational and implementation services to Australian businesses. In 2012 he authored a book on globalism called The Third Wave.