Home or away? Australian channel weighs up offshoring

Home or away? Australian channel weighs up offshoring

Partners face balancing act between local and overseas support services

Credit: Dreamstime

Scan the web pages and newsletters of any technology publication this week, and no doubt a grimacing image of Andy Penn will emerge.

While this is commonplace for the embattled CEO of Telstra, this time the narrative centres around offshoring, amid plans for the tech giant to open an Innovation and Capability Centre in Bangalore.

Dubbed as India’s ‘Silicon Valley’, the search for skilled workers overseas has caused outrage within the union representing Telstra workers, in light of plans to make more than 8,000 employees redundant in Australia.

Of course, the actions of Telstra - a titan of the Australian technology sector - carry ramifications beyond that of a small provider, such is the nature and reach of the telco beast.

But offshoring, the search for skilled workers and the balance between cost savings and customer value are frequent topics of conversation within the channel, as partners juggle recruiting locally and from overseas.

Pros and cons

For example, the next time a crisis hits one of Seccom Global’s blue-chip Australian customers, chances are they will be phoning India.

Amid a climate of mounting staff costs and pressure for 24-hour service, the Sydney-based cyber security specialists recently opened its first overseas support centre in Ahmedabad, western India - the provider’s second facility overall.

According to Michael Demery - managing director of Seccom Global - the value lies in the benefits a new centre can offer customers, rather than the physical location.

“If you ring our office in Australia or India, you probably would not know the difference,” he said.

In truth, outsourcing overseas is nothing new in the IT industry.

For the past 25 years, Indian hubs such as Bangalore have served as cheap labour conveyors for global tech giants, while the Philippines has recently emerged as a significant outsource player, with a market reportedly valued at $23 billion.

In 2016, Telstra was one of many turning its sights to the Philippines when it announced plans to axe 326 Australia-based customer service jobs in favour of the emerging Asian country.

It’s instances like this, when Australian jobs are the victims, that is when offshoring tends to spark a fierce backlash among consumers.

As explained by Sachin Verma - co-founder and managing director of Oreta - it’s undeniable that - for many consumers - speaking to someone in the local market is associated with better customer service.

“We always prefer to talk to someone in customer service from onshore, as we feel like we’re in better hands,” he acknowledged. “The offshore service desk creates the sense that you’re being spoken to from a script and you’re not getting the best service.”

Melbourne-based Oreta recently opened a managed services support centre in Bangalore, India.

However, Verma stressed that the majority of customer-facing operations are handled in the provider’s office in Victoria, while the overseas centre assists after hours, who will hand over to staff in Australia if the incident concerns compliance.

“We are a big believer in Australia-first, so if you can find the right talent here it’s better,” he added.

Around the clock

For some, offshoring remains a thorny issue, viewed by the customer as a cost-cutting exercise designed to boost company profits at the expense of service.

Likewise, other key issues centre around communication, cultural and social barriers, time zone differences and loss of intellectual property.

In speaking as a veteran of the industry, and founder of a managed security service provider (MSSP), Demery accepted that cost is often the primary driver of any such offshoring move.

So much so that for the price of employing six people in Australia, the business could hire 20 staff in India.

But despite this, Demery argued that in today’s always-on world, a world in which security hackers continue to gain momentum, partners can seldom afford to sleep on the job.

Because when support is required 24/7, not only does that become costly in Australia, but fails to help customers with security needs, according to Demery.

“Most organisations, and we used to do it this way, have a reception you ring after hours,” he explained. “This would then go to an on-call engineer who you would wake up in the middle of the night.

“Often if somebody is going to attack your network, they’re going to do it at 3am when there is nobody watching. Today, you need to have to have somebody watching you constantly. You have to have proactive behaviour.”

The 24/7 model, Demery said, is designed to provide Seccom with a competitive advantage when competing in upcoming tenders.

“Our market is getting very competitive,” he admitted. “You have to have things your rivals don’t. Saying we offer 24/7 support with a senior engineer is a big advantage for us.”

Echoing Demery’s comments, Verma agreed that a 24/7 model does require overseas support, at least from a technical perspective.

Verma is fond of the term “right-shoring”, which has emerged in business jargon over the years as an argument against offshoring detractors.

The term reflects going overseas for more than just the dollar value.

“Right-shoring is when you understand what your customers expect,” he added. “Consumers don’t care if the product is made in China, but they like services for quality and faults to be onshore. It’s similar in IT.

“It’s about leveraging scale, timezone and specialisation. To me the scale is when you get the real benefit from outsourcing.”

Balancing act

For Demery, whose clients include the likes of Toyota Australia and the Sydney Opera House, making an overseas base an “extension of your office” rather than just hiring an IT outsource firm is a huge point of difference for customers.

“You have to make sure both teams are well-integrated and can communicate,” he said. “You have to have a really strong reporting structure.

“If you just outsource it to a separate organisation that takes over after hours then you’re not going to get the same level of security.”

Verma, who lived in India during its huge IT outsourcing boom 20 years ago, acknowledged that despite the advantages, service providers that offshore can gain “a bit of a bad reputation”.

And he said that it may only be a matter of time before using foreign labour is actually superseded by the rise of artificial intelligence and machine learning.

At the end of last year, it was estimated that up to 56,000 Indian technology employees were laid off as companies such as Infosys and Cognizant cuts vast swathes of their workforces.

While AI is often defended for creating jobs rather than eviscerating them, a McKinsey report from this year pointed out that at least five per cent of jobs could be soon obsolete.

However, this does not mean outsourcing’s complete extinction.

“The back office jobs we send overseas will decline,” Verma said. “But when you look it from a skills-based outsourcing, that should increase. AI will take jobs, but it will ultimately mean work is being done by a better-experienced and much more efficiently managed team.”

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