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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Distributed workplaces – a new way of doing business

Wednesday, Aug 27.

The nature of the traditional workplace is changing, and quickly. Where once upon a time workplaces were defined by their physical premises, today the workplace is more defined by technology platforms than bricks and mortar.

Aug27

Distributed workplaces – a new way of doing business

Wednesday, Aug 27.

The nature of the traditional workplace is changing, and quickly. Where once upon a time workplaces were defined by their physical premises, today the workplace is more defined by technology platforms than bricks and mortar.

Hot desks, working hubs, remote log in, mobile devices, cloud computing and paperless offices are just some of the things making it possible to do work from anywhere at any time. The possibilities which flow from this for business are enormous. No longer do we need significant amounts of expensive city space to run a large organisation. Seats can be shared, staff can work from home and low-cost offshore workers can be engaged virtually.

In addition, video conferencing, an array of online collaboration tools and high speed internet are making virtual collaboration easier and more accessible than ever. Where only five years ago working remotely often involved slow connection speeds, frequent drop-outs and expensive technology solutions now cloud based computing systems and high speed connections are making the quality of the virtual working experience often as good as the real one.

As the flexibility of working arrangements increases so too does the range of contracting arrangements being explored with staff.  No longer are staff just employed to work full time. Whether it be working part time on an hourly rate, being paid on some measure of output or even being engaged as a non-exclusive specialist (who may also even do work for competitors)  the range of staffing options are really only limited by one’s imagination.

So what does all of this mean for the quality of professional services on offer?

Interestingly when properly embraced these changes can significantly improve both the speed and efficiency with which work is done without compromising quality. This of course can in turn result in reduced cost to clients and better overall outcomes.

Many new start-up businesses are fully embracing the opportunities which flow from a distributed workforce. Some are setting up with very small or even no central office and are performing nearly all of their services through a distributed workplace bound together by a central shared technology platform.

As we become more accustomed to working this way, the potential to also tap into the significant cost savings that flow from the use of offshore labour becomes more accessible. Consider that a staff member working for you in the Philippines is likely to cost less than one fifth of a comparative staff member in Australia but be as good and you can start to understand where the future possibilities lie.

The workplace as we know it is changing quickly and those professional service firms that choose to embrace and take advantage of it will benefit and prosper. Those firms who don’t however may in time find that they have a dwindling number of clients to provide their services to.

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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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