Australian firms still nervous of offshoring

Australian firms still nervous of offshoring.
Written by Munir Kotadia, Contributor

Although more Australian firms are shifting simple business processes to cheaper overseas destinations such as India, firms are being cautious -- and justifiably so, according to analysts.

Australian firms are still slightly nervous of the whole offshoring concept, according to Rolf Jester, vice president, IT services market strategies at Gartner.

-Many companies are nervous about having work done by people in other countries -- and there is some justification behind that," Jester told ZDNet Australia. -Working across borders and across business cultures is not as easy as having work done by a local provider. There are some additional costs and risks that partly offset the savings."

However, companies can minimise the risk by only choosing to outsource the "right kind of tasks".

-For the right kind of tasks, companies can still gain good quality services and in many cases save some money too as long as they manage the project well and pay attention to all the factors that are needed to ensure success of offshore engagements," said Jester.

Rob Durie, chief executive of the Australian Information Industry Association (AIIA), admitted that compared to the UK and US, Australian firms have not been as willing to send work overseas.

-We certainly haven't seen the same penetration of the offshoring model in Australia that we have seen in Europe and North America," Durie told ZDNet Australia on Thursday.

-The price differential isn't so severe ... also, we pride ourselves on the security of our systems and nobody wants to put that under threat," he said.

However, the move to offshore low-end processes is inevitable, according to Sri Annaswamy, founder and director of outsourcing consultancy Swamy & Associates, who said there are two clear outsourcing segments, low-end Business Process Outsourcing (BPO) and high-end Knowledge Process Outsourcing (KPO). He believes the "right kinds of tasks" referred to by Rolf means low-end rather than high-end projects.

-Just like much of the manufacturing went out of Australia 10 or 15 years ago, we are starting to see low-end BPO activities going out of Australia [and into India, China and other low-cost destinations] and a trickle of KPO activities coming into Australia," he said.

Annaswamy believes that Australia could actually become a global hub for bringing in high-end KPO business because of its relatively skilled workforce and developed infrastructure.

-We believe there is a two or three year window of opportunity for an Australian destination like Brisbane or Adelaide for example, to be developed (with some effort) into global KPO hubs," he said.

The AIIA's Durie also expects the value of work coming in to Australia to balance out the work that is sent overseas.

-Will there be more offshoring in 10 years time than there is now? Probably. Will that mean there are no jobs in Australia? Absolutely not.

-People are looking for a work environment that is stable in 15 years time -- in terms of political shifts and so on -- we have a lot going for us in that department relative to virtually every other location in the world," added Durie.

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