Why Daryl Williams is wrong

commentary Daryl Williams' interpretation of a KPMG outsourcing study is flawed. The Minister for Communications, Information Technology and the Arts claims Australia's No.
Written by Tony Healy, Contributor
commentary Daryl Williams' interpretation of a KPMG outsourcing study is flawed.

The Minister for Communications, Information Technology and the Arts claims Australia's No.1 ranking in the KPMG 2004 Competitive Alternatives study shows Australia is an attractive destination for offshored jobs, thus invalidating concern about the offshoring of local jobs.

In actual fact, the study mainly focused on business profitability in various locations, not the attractiveness for winning software work from overseas. Indeed, one corollary of the study is that Indian outsourcers such as Infosys or Wipro wishing to establish operations in Australia, principally using foreign workers, will find it profitable to do so.

Most interesting of all is Williams' response to Fran Foo's column, Australia: A country in denial , where Foo highlights the omission of India from the study. India is the most aggressive, fastest growing and most successful outsourcing destination in the world. Its low labour costs would give it a high rank on the KPMG assessment, almost certainly eclipsing Australia's supposed Number 1 rank. It is clearly foolish for Williams to base claims of international competitiveness on a study that omits India, whatever the supposed justification.

Williams claims the omission is valid because Indian firms seek only so-called low-end software work, while Australia is seeking high-end work. This would be news to India's switched-on communications and IT minister, Arun Shourie. Indian firms and the Indian government are explicitly seeking the highest value work they can obtain. This includes animation and special effects work, which is the curious example the KPMG report used as being representative of "advanced" software. Many Western firms including Intel and Google have established or are establishing advanced R&D facilities in India.

Secondly, the unstated implication in the KPMG report is that in-house corporate software projects, which are generally the type being captured by Indian firms, are low-end. But this is also not true. Most corporate software projects involve considerable complexity, sometimes easily exceeding that of special effects software. In any case, corporate software is no more low-end than accounting and legal work, which presumably Williams is not describing as low-end work.

Software development in general is sometimes held out as being a low-end activity, while business and project management are said to be high end. This plays to the prejudices of business managers but is not true. Software development requires more training and talent than business and project management and is the more valuable long-term capability for a nation. More importantly, Indian outsourcers do not leave project management to their Western customers anyway; they do it themselves. The role that Western managers fill is nothing more than that of a customer -- specifying what they want the software to do. This is neither design nor project management. When software work is outsourced, everything goes.

The KPMG study claims that it concentrates on "advanced software," but this is undermined by its inclusion of Web development work and multimedia, which are relatively low skill activities, and its inclusion of call centres. It's also undermined by the study's analysis of distribution costs for software, which concentrates on distribution of consumer software, not special effects and other advanced software. The conclusion must be that the study's claim to be concentrating on "advanced software" was superficial. There is no reason to make this distinction in software but not other sectors.

Rather strangely, Williams' statement also attacks South Australia's proposed new Fair Work bill, alleging it will harm the state's 7,000 IT contractors. Williams does not explain how this will occur but, with a straight face, quotes one of the most biased sources in the workforce debate, the IT recruiter lobby group ITCRA (Information Technology and Contract Recruitment Association). ITCRA represents labour hire firms and employers, not workers. ITCRA doesn't like the bill because it provides greater bargaining power to the workers that its members derive their income from.

Hopefully, Williams will start paying more attention to Australia's important software industries and their vital professional workforce, and stop relying on the labour hire industry for advice.

Tony Healy is a Sydney-based research software engineer and policy researcher.

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