How I vastly improved my IT business with an offshore team
Thursday, February 12, 2015/
Six years ago I could not have pointed to the Philippines on a map. Today I take business clients there every month and reveal to them everything I’ve learned about global resourcing over five years of amazing experiences.
It began in 2010 when I started experimenting with a little site called oDesk – before it exploded into the mainstream. I found a lady from Manila who was happy to do data entry work for $A2.50 per hour. With my head full of articles I’d read about “sweat shops” and “slave wages”, I questioned her. She said she’d had an office job but wanted to try working from home. I was her first client on oDesk.
Given the price and location, I had low expectations but she was easy to work with and over six months we gave her more and more work. It took me a while, but when I eventually got to know our new team member, I discovered that she has an MBA and had a senior position in a global car manufacturer in Manila. We had been giving all our low end odd jobs to one of the most experienced and skilled members on our team!
That broke something in my brain… MBA… rarely makes mistakes… works from home because she wants to… And prices herself at $2.50 an hour?!
I did some research and learned that living costs in the Philippines are about one-eighth of those in Australia. I then employed her directly on a 40-hour weekly salary of around $290 per week, meaning she earned the equivalent of about $58 per hour in Australia. She has now been our administration manager for over three years because she was immediately able to take on all the other duties of our Australian manager when she resigned to move interstate.
Wondering what other skills I could find outside Australia, I spent a lot of time travelling and researching the global talent marketplace. I quickly realised that while I had been busy building my business in Australia, the world had quietly changed. A technical and education revolution had created millions of skilled workers in my “offshore backyard”, ready to bolt into any business.
The technology needed to connect workers from all over the world is now priced so that any Australian business can afford it. At the same time, high quality English is becoming universal in certain parts of Asia, and with university education frequently on par to that in Australia. Moreover, the Philippines is in a similar time zone to Australia and only an eight hour flight away.
Odesk had been interesting, but exploring a global labour hub was mind-blowing.
I found no less than eight different staffing models available and mapped out the benefits and drawbacks of each one. I found that some models suited large business only, some suited SMEs perfectly, and some were just not worth choosing in any circumstance.
My IT business has always been on the leading edge. We introduced leading remote support and monitoring tools in their early days, and we built and sold our own private cloud infrastructure before “cloud” was even coined as an IT term. Predicting future trends has become second nature to me, and it is very evident that the way the world was employing talent has changed permanently.
Over three years, I researched and experimented within my businesses to find out what could be done offshore and what could not. During this time, I published a book with the intention of helping all Australians realise these global changes present both threats and opportunities to our way of life.
The improvements in my business led to requests for information from other SMEs. Eventually, I compiled much of what I learned into a “blueprint”, detailing what had worked and what hadn’t. This evolved further and since 2013 I have been giving seminars around Australia and running business tours to provide first-hand, real-life insight into everything I’ve learned.
Key findings of my research include:
- The skills available in Australia are available in the Philippines. Anything done with a computer or a phone COULD potentially be done offshore.
- Finding the right skills and ensuring you retain great staff are crucial. There is a large mass of lower skilled workers, and qualifications are not indicative of skill.
- Because of new staffing models, offshoring is now MORE relevant to the SME sector than to big business, giving some SMEs the ability to punch above their weight.
- It takes time and effort to make it work. Hiring people offshore is easy, but the devil is in the detail, and it can be frustrating without guidance.
- Replacing roles offshore is not as successful as shifting TASKS. Many of our Australian senior staff were initially suspicious of offshoring, but now love the additional career opportunities it presents, and how much more time they get to spend on enjoyable tasks.
- Some things are easier to implement offshore than others. Some skills are easy to find, some are not. Get advice before setting your strategy so you aren’t starting with the hard things.
- Failure rates offshore are quite high. I mapped out all the reasons why businesses were failing and found that all were preventable with proper preparation and understanding.
- The businesses which get the best value from offshoring are those who see it as a medium-term evolutionary process and a way of optimising for efficiency. The biggest wins come over a 2-3 year time frame.
It seems to me that the onshore-offshore model I have implemented in this IT business will become normal in the years to come. Some insights include:
- It has more staff than previously, yet a much higher net. More staff means shorter wait times for clients, and additional maintenance checks we can afford to do while keeping prices reasonable. (We are also taxed in Australia – much better than a foreign company selling here and Australia getting little or no taxation revenue!)
- We treat both our Australian and Filipino staff like gold. Gold is gold no matter where it is mined, but in some places you get more gold for your dollar.
- Sales support, procurement, administration and most level 1 technical work is entirely done offshore. I see these tasks rapidly shifting out of Australia across all sorts of industries.
- In Australia, lower-level roles are often seen as a stepping stone to a better job or a higher wage. So you spend a lot of time training people who then leave for a higher paid job. With the Philippines team, those unwanted roles are great permanent careers.
- Although we do have high level engineers in the Philippines team, most high level engineering and client management is done in Australia, and always will be. There is no substitute for staying in face-to-face contact with clients, or for sending a great engineer onsite when needed.
- In five years we’ve never lost a Filipino staff member we wanted to keep. We’ve had pretty low average staff turnover over the last 13 years in Australia too, but not THAT low.
These results might be seen as unusual today but I’ve personally seen many companies that have been quietly offshoring for years. Many of the Australian companies you use every week, and the small businesses you would never think have a team offshore, are already there.
In the years to come, offshoring will become normal. Technology has made distance irrelevant and Australia must find its place in the global community. To sustain the fantastic quality of living we have come to expect in this country, we need to ensure we are doing as much as possible of the most valuable work here, and look for ways to grow high value jobs.
We must realise that we are vulnerable to foreign companies if we are nowhere near competitive on price globally. I know of a large web development company based in India who has one Australian employee here to do their selling, and they are selling a LOT. All the work is done offshore, all the profit is retained offshore, and they employ the bare minimum number of Australians required to get sales. This is the other side to global resourcing – the growing number of this new kind of competitor which undercuts our large SME marketplace.
The time to adapt is NOW.
Easy Offshore runs offshoring seminars for all industries, and industry-specific seminars for IT and accounting firms. Seminars and business tour dates can be found at www.easyoffshore.com.au
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