Aug 032012
business customer service is essential in the new economy

Through the 1970s and 80s we accepted manufacturing industries moving jobs offshore because those jobs were done by working class, blue collar workers and the future lay in white collar, middle class service industries.

As a consequence of moving manufacturing offshore, the US, British and Australian economies became more service based. The thought in the 1980s was that while goods could be made in Taiwan, the ‘knowledge industries’ couldn’t be.

Then the Internet came along.

A panel on The Future of Outsourcing convened by the Indian Institute of Technologies Association of Australia last night discussed some of these issues.

Now the service industries are being offshored, at first it was the low skilled service jobs like call centres but it didn’t take long for higher value work – such as paralegal, medical transcription and of course IT services – to follow.

The belief that white collar jobs couldn’t be taken over by cheaper foreign labour has been proved wrong.

It isn’t just those working in the call centres or IT departments of telcos and big banks that are being affected, those small businesses in support industries like secretarial services or design are finding their clients are moving offshore too.

What’s interesting with all of this is how long the executive classes can resist being outsourced. Indian and Chinese managers work for harder for less than their US, British or Australian colleagues and in many cases are better educated.

One can only wonder how long the partners of major consulting business can hold the line as well, these guys – the vast majority are men – have done very nicely charging first world rates while increasingly paying developing world rates.

Already Indian outsourcing companies, including at least two sitting on that Sydney panel, have set up their own consulting arms that cut out the expensive middle men. Without the overheads flashy offices and big packages for entitled partners, they’ll have a pretty competitive offering.

While we can cry for the high paid management consultants and executives who are increasingly threatened by these changes, the Anglo-Saxon economies have a real problem as service industries move offshore.

In Australia, the Bureau of Statistic’s 100 Years of Change in Australian Industry tracks how the nation’s industries have changed – in the 1950s Australian manufacturing peaked just shy of 30% of the workforce, by 2000 it had shrunk to 11% while service industries were doubled from around 25% to 50% of the economy.

While it’s unlikely we’d see the service sector workforce shrink by 2/3rd over the next fifty years, there’s a good chance incomes will fall in these industries unless we start to invest in education and skills which allow Australia to stake a place in the global economy.

One of the key takeaways from the Future of Outsourcing event was that this change is happening regardless of what we think is a fair wage for our work. It’s something our government and business leaders need to start considering.

  2 Responses to “Outsourcing the service economy”

  1. Hi Paul – although the trend towards offshore outsourcing seems to be driven mainly by price, I think that another consideration for Australian and US businesses is the availability of the platforms that can effectively connect locals with locals.

    For example, there are tons of really great platforms specifically designed to connect people and businesses with low cost international labour like oDesk, Freelancer, eLance etc however when you look at the options that people have to find local Australian freelancers or BPO for small businesses, the options are fairly limited.

    Although I’ve got no issues with overseas labour per se, there is definitely feedback that project managing offshore resources is troublesome and time consuming overall. On Airtasker, we’re completing quite a few coding and logo design tasks by connecting local businesses with Aussie freelancers and the feedback has been really positive given that project management is much simpler if the two parties can meet physically to discuss.

    So given that many businesses would actually prefer to work with local freelancers and the fact that many BPO tasks actually require physical presence (like photography, office admin etc), I think it’s a matter of creating and building up awareness of the potential platforms that can be used to connect locals with locals.

    Would be keen to hear your thoughts. Cheers, Tim

    • Hi Tim,

      Thanks for the comment. I think you’re spot on about the project management aspect of outsourcing and it’s something which overlooked by many of the outsourcing, offshoring and crowdsourcing advocates. Project management is hard work and has its own unique skillsets, which many of us don’t have.

      While I think most people want to work with local providers, cost pressures dictate they won’t. In this respect its like most other markets – we’d like to wear shoes, drive cars and watch TVs made by local manufacturers but the prices offered by offshore producers makes them too good resist.

      I think services like Airtasker may counter the price pressures by adding value for local producers, I’d like to hear how you go.



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