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BLOG: Outsourcing needs a fresh approach to work

Mohit Sharma (via AFR) | July 16, 2013
There’s nothing new in offshoring; it’s been operating in one form or another for centuries. But new strategies have to be created.

Outsourcing needs a fresh approach to work
Offshore employees in Manila, in the Philippines, are doing the work of developed nations. Photo: Julian Abram Wainwright

A few fresh high-profile examples have thrust the topic of offshoring Australian jobs back on to the agenda, but in reality, the practice is simply age-old business wisdom.

Globalisation and outsourcing go hand in hand. Both have matured and evolved together over the past 200 years.

In the 18th century, Great Britain used to outsource clerk and administration positions by using Indian resources from the colonies. These resources were trained under controlled and customised curricula to make them 'only' employable as back-office workers at these colonies.

This has been fortunate for India and other colonies, as that old education system which is still prevalent has enabled them to create huge pools of back-office resources which are now serving the globe.

Technology advancement and low telecommunication costs have made the globe a virtual office, and human resources a commodity. The trade of this commodity cannot be restricted by any artificial barriers or tariffs. Delivery is instant as there are no physical barriers. Geographical distances are no longer a limitation; instead they provide an advantage of operations across time zones which enables organisations to operate 24 hours a day.

Outsourcing has been replaced by "right" shoring. Outsourced jobs from Sydney are already being delivered from locations as diverse as Ballarat, Springfield in Queensland, Newcastle, Bangalore, Delhi, Robina, Manila, Hobart, Auckland, Chengdu, Ohio, Cape Town, Warsaw, Chile and Budapest.

Each location has inherent advantages and disadvantages. Quality, current availability and future pipeline of human resources are important key differentiators for these locations.

This list of locations is constantly changing. New cities are added and old ones get retired. Jaipur, Cebu, Orange and Duba are recent entrants, whereas Denver and Parramatta are no longer on the list.

In a global economy, a job lost in one location is a gain for another destination. Costs are like water and they find lower levels on their own. Artificial barriers like anti-offshoring laws or subsidising the low-end workers through social security or by forcing minimum wage levels are not a deterrent to outsourcing, but can actually drive and promote it.

Outsourcing has always increased whenever artificial barriers are imposed, as it makes the business case for the practice stronger.

Yet, when it occurs, outsourcing is always viewed in terms of local jobs lost.

Australian organisations are part of a globalised economy and are competing with global players. They cannot avoid being competitive and must reduce their cost base. Many are just deferring their outsourcing strategies and related decisions.


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