I remember getting and eating my first Kiwi fruit in the UK. I was about 16 years old and I did not know what to do with a fruit that was brown and hairy? Should I peel it, cut it or bite into it. What would it taste like? I was told that it was an excellent fruit and that it had all sorts of goodness as it had anti toxins and would be good for my health. The taste was described as tangy melon with a hint of sourness. I just bit into the fruit, skin and all to find that skin was not to taste but the fruit was excellent. However the fruit was very ripe and juicy and a lot of the fruit juice ran down my school shirt.
Many years on and whilst doing the rounds as an Executive Solutions provider in New Zealand I'm often asked these days to find "C" level people with experience of Outsourcing. A lot of New Zealand companies seem to be having their first "taste of foreign fruit" in terms of Outsourcing. People elsewhere in other countries have had their fill of Outsourcing but was it good for them? Will it be good for companies in New Zealand?
Back in 2010 Optimation a NZ company thought that the best way forward for any IT company seeking significant growth was to offshore all of the development work to India and keep the high value work of Business Analysis and Project Management in New Zealand. Amanda McVitty at the time wrote that Neil Butler the Co-Founder of Optimization had stated "It's an approach that is winning over local customers as demonstrated by the optimization led OHR consortiums recent success in winning a major, multi-year Dept. of Corrections outsourcing contract for Application Development, Maintenance and Support. " Who could argue with that on the back of their success?
Two years later (2012) Vodafone ditches Offshoring, creating 100 new jobs. Having welcomed the call centers from Egypt to NZ, this inspired the move of IT in Vodafone back to NZ. CTO Sandra Pickering said at the time, "It is more cost effective to hire New Zealand IT professionals".
If this is the case and given that the cultural differences are less than traditional offshoring countries, this certainly makes NZ a perfect place to become an Outsourcing haven, providing On Shore, Near Shore and Offshoring?
Vodafone moved its offshore development from India back in House. For some companies it is critical that they retain IP over products, services and applications. Development and Testing was returned to New Zealand and interesting enough the company that gained substantive testing work in Vodafone was Optimization. The company who had looked to India for everything except BA and PMs? This must have been a real turnaround for the company and a "sign of the times", or was it that they had found that as a New Zealand company they now offered a better Outsourcing model.
Many other companies who have outsourced their IT are now returning to "In House". These companies and Vodafone normally cite the reasons as being due to hidden costs of Management Layers and the physical communication to get things done. A traditional offshoring country will try and sell "apples against apples", when they are really "apples against oranges".
An IT developer on Shore could cost $ 750 a day and the off shore country will tell you that they can do this for $ 100 per day or less. What they do not tell you is the hidden costs of translation and the management costs of their developers. Before you know it the time spent by your own people translating what was said and what was needed, to what was delivered, enabled the On shore developer to be more effective and a cheaper option.
ANZ in NZ back in 2013 offshored jobs to India. This was argued by the unions and they were told it was done to increase profits. Given the banks' profits at the time it made no sense to the union or the people who lost their jobs. Canon NZ although set up their call center on the North Shore creating 80 new jobs and for their customers that felt happier that they could speak to someone from their own country rather than offshore. Canon's country manager Mike Johnston said at the time "Superior customer service is a priority and a point of difference for the company. It makes good business sense to manage the contact center in house, rather than sending it offshore"
Having seen an exodus of Kiwis chasing the Australian dream, we now see Kiwis returning to NZ and Australian companies moving to NZ. Even with the mining boom flattening out in Australia it is still cheaper to get work done in NZ than in Australia, by about one third.
Australia's cost base has become too high and NZ has cheaper labor costs and cheaper electricity. IBM, Heinz, iiNet, lumo, Quickflix, L'Oreal, Australia's third largest bank and Fairfax Media have moved jobs over to NZ. Given NZ and Australia speak English, both are culturally different, but very similar. More like "kissing cousins". So it's not just cost that makes a factor, communication and excellent skills make NZ a great place to either Near shore or move to from Australia.
Pete Macauley of Michael Page represented, "Now more Australians are considering heading over the ditch". His reason being that job losses has pushed Australian unemployment to a four year high.
There are some down sides to being based in NZ. One of those is having a HQ in Australia and that can make the NZ part of the company the poor cousin. Having worked with several companies in this situation here in NZ, I see the frustration for the CEOs and Senior Executives. One such company based in NZ with an Australian HQ had won lots of work and had a great pipeline of future sales. They were a good company with an excellent reputation. The CEO and staff never hit their bonuses. The reason being they had too much work and had to use extra Resource. Instead of using external NZ Resource they had to use HQ people from Australia. This meant that there costs became too high and the NZ operation made a loss on the projects, while HQ made a profit and earned their bonuses. The NZ operation part of the company lost two successful Country Managers, from being the poor cousin.
On Monday 21st July 2014, The Otago Times reported on KiwiRails outsourcing to China and asked the question was it worth it? "Ongoing issues with KiwiRail's controversial Chinese-made freight wagons are making the state-owned enterprise's decision to award the building contract overseas look unexpectedly questionable. than a dozen China CNR Corporation staff and a team of translators, working under the supervision of KiwiRail staff. At least some of the work is on brake components. However, the obfuscation, rhetoric, semantics, claims and counterclaims between unions, politicians and KiwiRail in the long-running saga make it difficult to establish whether the work involves '' repair '' or '' upgrades '', whether it should be expected, and whether the full costs of all work so far are being borne by the Chinese manufacturers Egypt KiwiRail and the taxpayer "
For some industries outsourcing can make sense especially in NZ. Given the entrepreneurial spirit of a pioneering nation, the majority of NZ businesses are SMEs and start-ups. As a start-up you often have issues with constraints on finance. This is when Outsourcing can be an advantage. By using the internet it is possible to get up and running with a virtual employees such as http://www.freelancer.co.nz a Sydney based operation. Having started up several business' of my own this was a short term solution to my constants of finance. It's surprising how little you need to build up a multi-million dollar business from a start-up. My last successful multi million venture started from a loan of $ 3000.
The CIO web site believes that there are seven outsourcing nightsmares that you need to avoid before you go down the outsourcing route. A quick read will help you on your journey. http://www.cio.co.nz/article/466780/seven_outsourcing_nightmares_-_how_avoid_them/
Although this comes from a technology bias this could be used generically.
NZ has world class talent that for English speaking countries could provide an alternative to the established Offshoring Countries, in terms of communication, cost, culture, and time zones.
So are companies in NZ better looking for companies in NZ to Outsource their work to? As long as they have complete control of their finances, resources and understand the offshore trade off. Look at NZ first, you may be pleasantly surprised, especially for midrange and higher spend projects.
For me, Outsourcing in the beginning was like my first kiwi fruit, very messy. Having had several experiences with kiwi fruit I have learned to slice the fruit and scoop out the inside getting the fruit part that tastes good to me. Even better is to make them into ice blocks !. I have learned that Outsourcing for me now means that I do not need to go overseas for everything as the skills and competitive price are here within New Zealand.