Outsourcing good, offshoring bad

Outsourcing good, offshoring bad

Summary: There is much sense in outsourcing, but offshoring is a different kettle of fish.

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There is a strong business case for firms to hive off certain jobs, and to give certain tasks to specialists. Usually, the quality will be better, and it will work out cheaper than doing it yourself.

As people always say, outsourcing certain functions allows you to concentrate on your core business — but "offshoring" is often a source of trouble and false economy.

This weekend, NBR reported on the mixed experiences of people using various freelancing websites.

I am pretty much a free-market kind of guy, so I will discount the protectionist talk about the negative impacts that outsourcing will have on your domestic economy. Free trade is a two-way game that benefits us all overall.

I am more concerned about whether offshoring actually benefits a business.

There have been many cases where service from overseas call centres has been substandard, and banks and telcos have lost business because of it. Some, like Z Energy, have even brought such customer-service work back home, to try to provide the best customer service.

As NBR's Chris Keall reported, he too has had second-rate service when he has offshored work, even if just to perform a little experiment. Those commenting on his story shared similar tales.

Now, there is another trend for businesses to outsource many other types of work, such as office, admin, and web-design activities. We've had the rise of the virtual assistant or professional.

Many benefits are enjoyed by both the business and the virtual assistant from outsourcing, various players told me, but where work was offshored, the delivery was typically second rate, and successor contracts were brought back to New Zealand.

It may well be that offshored work is cheaper, which is the business case for it, but it seems as though it is often a false economy.

There are language and cultural barriers to deal with, which might make it harder to specify what you actually want, or the supplier does not properly understand. The overseas-based agent might not have sufficient skills, or their equipment might not be up to scratch. Hence, the greater risk of failure.

Furthermore, complaining to someone in some far-flung continent is harder than dealing with them if they are just down the road. Legal and consumer protection won't be as strong as if you are dealing with a local or trans-Tasman company.

Earlier this month, I argued that it is best for the New Zealand government to keep its cloud Kiwi.

Likewise, we should endeavour to keep our office, web, and similar functions Australasian.

Feel free to get it done on the cheap somewhere else, but if it goes wrong, as is often the case, then it won't work out so cheap after all.

You only get what you pay for — and you don't need to be a protectionist to argue that.

Topics: Outsourcing, New Zealand

Darren Greenwood

About Darren Greenwood

Darren Greenwood has been in journalism, not all of it IT, since the days of typewriters and long before the web spun its way around the world.

Coming from Yorkshire, he can be blunt, and though having resided in New Zealand, as well as Australia, for quite some time, he insists he is not one of the 'sheeple!'

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3 comments
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  • Dude...wake up

    It seems that you've been asleep for a few decades. Not sure what else to say...complete nonsense!
    rbhowmik
  • So it's OK if NZ offshores to Australia & US?

    Or is it bad only when it is offshored to the countries which you dont like?
    mm71
  • Ignorant

    Its funny that you claim as a open minded, but have a biased tone throughout. Like selecting any vendor/supplier locally, companies who do their research prior to engaging anyone for offshoring/outsourcing will ALWAYS have better ROI. If you want dirt cheap and jump on anyone who has justed started business you WILL tumble and roll with them. So stop running around with one or two examples of failure and do research on the number of satisfied people.

    I work in a offshore model in a US MNC and guess what, our team here in asia has the high customer satisfaction rate in the history of the company and in the industry.

    Good things need effort to find!!!
    OrionBelt