Outsourcing vs Offshoring

The use of offshore white collar labour to achieve significant cost savings is a relatively new concept. A number of different terms have been thrown about in describing the different ways that an offshore workforce can be implemented. You may have heard terms such as outsourcing, offshoring, offshore outsourcing, remote staff or BPO, to name a few.

With all the different terminology floating around to describe this phenomenon out there it can be confusing to gain an understanding of what solution will work for you. To make it a bit easier to understand, the general concept of using an offshore labour solution can be defined as either 'offshoring' or 'outsourcing'.

Outsourcing involves the organisation using a third party provider to provide the services required without having direct managerial control over that employee, meaning that the third party has all of the control. Using an offshore solution the organisation utilised the services of an intermediary who facilitates the process whilst the organisation maintains control of the employee.

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Offshoring – a good or bad thing?

Tuesday, Jun 17.

Whilst much is often made of the perceived negatives of offshoring, mainly loss of local employment or employment opportunities, very little is said about its benefits. Both the 2007 OECD report Offshoring and Employment, Trends and Impacts and the 2012 University of Melbourne paper Developing an Asia Capable Workforce paper found that it is difficult and complex to determine whether offshoring produces a net gain or loss to the country offshoring.

Jun17

Offshoring – a good or bad thing?

Tuesday, Jun 17.

Whilst much is often made of the perceived negatives of offshoring, mainly loss of local employment or employment opportunities, very little is said about its benefits.  Both the 2007 OECD report Offshoring and Employment, Trends and Impacts and the 2012 University of Melbourne paper Developing an Asia Capable Workforce paper found that it is difficult and complex to determine whether offshoring produces a net gain or loss to the country offshoring. Some of the positive effects of offshoring however included:

Growth in consumer  incomes
The reduction in the cost of goods and services which flows from the saving from offshoring increases local consumer incomes. Growth in incomes in turn creates more consumption and/or savings.  Growth in consumption increases local employment where the goods/services consumed are locally produced. However the jobs that may be created can be in sectors different to those from which the jobs were offshored.
 
Improved competitiveness
Businesses which save money from offshoring can pass on the savings to their customers, and thereby become more competitive.  Alternatively they may choose to re-invest those savings into the business to expand the business and thereby generate more local employment typically in more highly skilled jobs.
 
Export Growth
Growth in jobs and incomes in the country providing the offshore staff increases their consumption of our goods and services.  Our goods and services are also more competitive because of the cost savings achieved from offshoring.
 
Control of Inflation
Reduction of costs is often the principal reason for a company to offshore services.  This reduction in costs assists better control of local inflation and slows consumer price rises.  This in turn assists keep interest rates low and stimulates investment and job creation.
 
Growth in tax revenue
Reducing costs and improving competitiveness ultimately result in more profitable businesses which in turn pay more local taxes.
 
Greater Asian engagement and understanding
By engaging with an Asian workforce this allows local business to better understand Asia, its people, culture and opportunities.  This in turn assists businesses understand how to sell their products/services into the Asian marketplace.
 
So it can be seen that whilst it is easy to simply suggest that offshoring is a bad thing the issue is in fact far more complex.  Whatever the situation however and like it or not we are now working in a global economy with a globally accessible labour pool. The ease of access to this international labour will only improve with further advances in technology. Whether we choose to embrace and benefit from this or be fearful of and resist this may well have a significant impact on the future prosperity of our country.

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Law Firm offshoring – what can be offshored and how to do it?

Thursday, May 08.

When considering whether to implement a plan to offshore functions it is important to bear a few things in mind. Firstly plan for teething issues. It may be difficult to anticipate at the start where these issues will surface but if you plan for a level of difficulty and communicate this to all the key stakeholders this will help a lot with both managing their expectations and ensuring that they remain patient while the issues are resolved.

May08

Law Firm offshoring – what can be offshored and how to do it?

Thursday, May 08.

When considering whether to implement a plan to offshore functions it is important to bear a few things in mind.  Firstly plan for teething issues.  It may be difficult to anticipate at the start where these issues will surface but if you plan for a level of difficulty and communicate this to all the key stakeholders this will help a lot with both managing their expectations and ensuring that they remain patient while the issues are resolved. 
 
Similarly it is wise not to start with offshoring functions that are either client facing or are in direct support of you lawyers (such as WP).   A better approach is to start with functions that report into your existing business support team, such as finance and marketing support, and focus on getting these roles up and running well.  Once you have developed more confidence and understanding about how the offshoring works and have also ironed out any initial issues you have you can then look to continue the roll out of the strategy to include functions which directly support your lawyers and eventually functions which may also have a degree of client interaction.
 
The types of positions which have been successfully offshored by other firms include:
 
  • Accounts payable and receivable
  • Business analyst
  • Credit manager
  • Book keeper
  • Payroll officer
  • Graphic designer
  • Web designer
  • Web developer
  • SEO/SEM manager
  • Marketing assistant, including CRM database management
  • Word processing
  • Human Resource Administrator
  • Recruitment manager
  • Level 1 and 2 help desk support
  • Software developer
  • Mobile applications developer
  • Precedent co-ordinator       
  • Legal research clerk
  • Virtual assistant

When implementing an offshoring plan it is important to get the internal communication and roll out plan right.  Often the major impediment to your offshoring plan is your local staff who might be threatened by the strategy.

Some things that can help with local staff engagement include:

  • Carefully selecting the managers who will oversee the initial offshore staff to ensure that actually want to make it work
  • Modifying the position descriptions for these managers to include the management of the offshoring function and also modifying their KPI’s to include the success of the offshore team
  • Communicating to the firm what your plan is for offshoring and how this will likely affect everyone
  • Loudly and visibly celebrating your initial offshoring successes
  • Rewarding your local managers, who are overseeing the offshore teams, once they are a success
  • Bringing some of your offshore staff to Australia to meet the local staff

With ongoing advances in technology geographic separation in the workplace is becoming less and less of an impediment to performance.  This is opening up opportunities for law firms to utilise low cost highly skilled labour in developing countries and thereby significantly change the cost structure for their business.  

 

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What do lawyers need to learn from jellyfish?

Tuesday, Apr 08.

A recent scientific study has suggested that Jellyfish may in fact be the most efficient animal in the world due to their unique propulsion system. So what has this got to do with lawyers?

Apr08

What do lawyers need to learn from jellyfish?

Tuesday, Apr 08.

A recent scientific study has suggested that jellyfish may in fact be the most efficient animal in the world due to their unique propulsion system.
 
So what has this got to do with lawyers?
Well when it comes to efficiency it is probably fair to say that most law firms have a fair way to go.  If the jellyfish was the benchmark of efficiency then in marine terms the typical law firm would likely be regarded as a dislodged, half-sunken shipping container.
 
So why do law firms need to become more efficient?
For many decades law firms have managed to get away with charging clients on a cost accounting basis (i.e. hourly rates).  In its early days the manufacturing industry used to do the same but one day the consumer woke up and realised it wasn’t about how much it cost to make but rather what they would pay.  This is finally now catching on with law firm clients. An increasing number of clients are no longer prepared to pay for law firm inefficiencies.  These clients are often now dictating to firms what they are prepared to pay, particularly where the work is repetitive and therefore predictable. With this client driven pressure growing firms need to find ways to do things more efficiently than they have in the past.
 
Where are the opportunities to become more efficient?
Usually the big fixed costs that firms have are rent and wages.  If it is possible to somehow reduce these costs without reducing the available firm resources that would provide the biggest single cost reduction for firms which would in turn enable them to pass on these savings (or some of them at least) to clients.  But how can this be done?
 
The “game changer” - Flexible labour
Cloud computing, paperless offices, integrated practice management systems, centralised data storage, mobile devices, high speed internet, video conferencing and other online collaboration tools have made it easy for staff to work seamlessly from a range of different locations.  In addition many staff, particularly working mothers and older practitioners, are often prepared to trade off the certainty of a fixed job/salary against the flexibility that comes from working as a contractor.  This flexible, predominantly home-based, contract labour force is allowing firms to both grow their full time resourcing levels and also respond to the ebb and flow of their client’s requirements without also having to rent more space and otherwise substantially increase their fixed costs.  
 
In addition the same technologies and systems that allow staff to seamlessly work from home are also now enabling another category of staff – those working offshore. The potential to use offshore staff as part of your business back office can produce enormous cost savings – up to 80%.  The range of functions you can also use them for go well beyond simple WP and can include roles such as accounts receivable and payable, billing, debtor collection, data entry, precedents coding, knowledge management, copy writing, SEO, SEM, HR support, IT support and more!
 
So what’s stopping law firms from offshoring?
Unfortunately lawyers love the doctrine of precedent and often need to be shown many, many examples of things working for other people before they even consider the possibility of doing it themselves.  Add on top of this how lawyers have convinced each other that their businesses have no value and it is becomes easier to understand why it is difficult to get firms to spend the money and invest in innovation.
 
The time is however rapidly approaching where lawyers won’t need to consider changes like this to innovate and stay ahead of the pack – they will need to do it just to remain competitive and survive …. Wow we really do have lots to learn from Jellyfish don’t we.

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