Shifting jobs overseas gets bad press but in the Asian Century, it’s the path to business success and survival.
By Ash Truscott
In a recent report, the Australian Services Union and Finance Sector Union claim that offshoring staff leads to a net loss of Australian jobs. Our experience suggests instead that offshore staffing can be a catalyst for business growth – and could even lead to an expansion in the Australian workforce.
More than 64 per cent of MicroSourcing’s Australian clients – all small and medium enterprises that lease offshore staff at our headquarters in the Philippines – say their initial decision to outsource was based on a desire to expand their team. Only 25 per cent say they used offshore labour to replace some of their existing staff.
What’s more, since hiring their first offshore staff member, 43 per cent of Australian MicroSourcing clients have seen their Australian workforce grow. A further 36 per cent have maintained the size of their Australian team, while only 21 per cent say their home workforce has contracted.
The ASU and FSU claim the US economy has suffered due to offshoring, and Australia should be wary of following the same path. But in fact our US clients tell a remarkably similar story to their Australian counterparts. Since engaging offshore staff, 44 per cent of them have seen their US-based workforce grow. Thirty-six per cent have maintained current staffing levels.
Rather than being the destructive bogyman the unions make it out to be, our clients’ experience suggests that offshore staffing can be an innovative solution for cash-strapped small businesses looking to kick-start their growth phase.
The debate about offshore staffing has focused on big business setting up vast call centres in India, but in reality it is Australian small businesses that stand to benefit the most from accessing affordable talent as they expand their business and forge into new markets.
In fact, offshore staff leasing might be the only viable staffing solution for start-up companies who simply cannot attract or afford the right people to join their firm. Once they kick-start their growth through offshore staff, they usually hire skilled workers in Australia too.
Our research suggests that offshore staffing is not a zero sum game. While some companies will move jobs overseas, others will use offshore staff to complement their Australian workforce and ultimately help their business grow.
Jobs data from the Bureau of Statistics supports our findings. The ASU and FSU claim in their report that 20,000 jobs a year are being ”lost” offshore. But this ignores the fact that more than 65,000 jobs were created in the Australian economy over the past 12 months and unemployment remains relatively low.
There is no doubt that technological innovation will force structural changes on the Australian workforce. To date there is little evidence to suggest this will lead to an overall loss of Australian jobs.
Digital technology means that an Aussie software designer can be based in Kalgoorlie while contracting to an employer in Silicon Valley. We rightly applaud this type of labour exchange as a great example of globalisation working in our favour. But we must also be aware that this kind of innovation goes both ways.
That’s why former Treasury secretary Ken Henry exhorted Aussie companies to embrace offshoring in his comments last month in a Sydney speech, signalling this is likely to be a recommendation in his highly anticipated ”Australia in the Asian Century” white paper.
Henry knows that Australia’s long-term economic viability must be based on expanding our exports into Asia. To do this effectively, we must embrace new technologies and efficiencies available to us – including offshoring.
The 20th century saw Australia transform itself from a highly protected economy into a remarkably open one. We decided long ago that the benefits of free trade in manufacturing and agriculture, which accrue both to Australia and our neighbours, far outweigh any advantage we may be able to buy by imposing tariffs and other trade barriers.
This lesson applies equally today. The unions claim more government intervention will ”save” service sector jobs. But ultimately it will just hurt the economy – and the wider workforce. Only by collaborating with the region will our economy grow.
Offshoring, like all other forms of hiring staff, does have risks. As every business owner or manager knows, not all employees work out. Choosing the right partner provider for your business and having a strong integration plan helps minimise the risks associated with offshore staffing. But ruling out offshoring altogether, or imposing more regulation as the unions suggest, will only have a negative impact on productivity.
Technological change and the fast-paced economic development of our neighbours mean the regional economy is changing fast. By taking a head-in-the-sand approach and refusing to keep up, Australia runs the risk of being left behind.
Ash Truscott is the managing director of MicroSourcing Australasia, an outsourcing company with staff in the Philippines.