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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.

Future guidance given by the top five outsourcing vendors at their respective annual meetings suggested offshoring in Australia will grow at average 11 per cent rate for the next five years.

This also means that, on average, 8 per cent (after efficiency gain and technological advancement) of such conventional and commoditised jobs will be lost and they will not be a part of the job market in the future.

For example, if 100 FTEs in IT ­­help desk jobs are outsourced, at least 95 per cent of these positions will never come back to Australia. Research we conducted at Mindfields found that for every one conventional and commoditised job offshored, on average 0.11 FTE of other dependent jobs are also lost.

So if 100 customer care jobs are offshored, it would result in the loss of IT hardware support, a reduction in spend on real estate, and suchlike. Overall, it will result in a net loss of 111 jobs.

Creating or artificially safeguarding these conventional and commoditised jobs can only be a short-term strategy and a sticking plaster approach. Such actions would be wasteful spending of hard-working Australian tax payers' money.

Government and outsourcing organisations need to work together to create new and non-conventional employment opportunities. They need to learn from history; in the early 1800s, Manchester in England was a hub for cotton and textiles but it lost this market to Indian subcontinent countries, despite their being British colonies, and Britain imposed hefty taxes on their cotton.

Manchester moved up the value chain, converted into a hub for steel and started exporting textile ancillary machinery.

The Australian government needs to consider a positive approach to create GDP-accretive non-conventional jobs, instead of imposing artificial regulations to protect GDP-decretive jobs which are subsidised by tax payers. When business models are evolving and changing rapidly, the government cannot afford to be behind the curve. It needs to be proactive to work with outsourcing vendors and their client organisations to promote Australia as a hub for outsourcing for high-end processes which might be judgement-based and non-routine.

Such positions could include actuaries, high-end animation, infrastructure management, social marketing and research, corporate finance analytics and high-end legal support.

The Australian government also needs to raise the bar for skill-set assessment for permanent residency. Only applicants who can add to the GDP should be considered. Developing economies such as India look towards countries such as Australia for premium resources and technical know-how for their liberalised economies in sectors such as insurance, legal matters, infrastructure and logistics. Australian organisations such as IAG, Macquarie, Blakes, Linfox and Toll Holdings are assisting these recently liberated economies, which are also among the most preferred destinations for outsourcing.


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