Why is offshoring such a dirty word?

[Scotland]

Interesting article in the news this morning...

http://www.news.com.au/business/wor...uch-a-dirty-word/story-e6frfm9r-1226652755492

UPDATE: The Australian Council of Trade Unions has slammed a controversial conference that includes talks on how to offshore staff.

The recruitment and HR conference Agile Talent Management: Optimise, In-source, Outsource, Offshore, Redeploy in Sydney today and tomorrow features a range of speakers talking about managing staff and headcount "cost effectively".

ACTU secretary Dave Oliver said: "It's disgraceful that at a time when workers are worried about their job security employers are getting together to plan how to send more jobs offshore."
In a blog post on the conference website, speaker Tara Knobel asked: "If 99.6 per cent of the world is outside of Australia, why is offshoring such a dirty word?"
"Especially when someone elsewhere in the world can do the same work faster, more efficiently and for less expense?" Ms Knobel's post read

Flicking through the comments, the common theme is that jobs going offshore equals losses in productivity, declines in quality and less local jobs. Essentially we're better than everyone else and nasty corporations push jobs offshore just to make higher profits. There's a large element of truth there, but an awful lot of naivety to go with it.

What are people's thoughts on the issue? For mine this is an issue that attracts a higher level of hypocrisy than most.

 

[chelseagle]

Probably because of its implicit threat to a person's financial security.

 

[Admiral Byng]

Well, I've been through it at a previous job. I used to work for one of the big four banks. They decided to set up a back-office processing centre in India, to do the same work as what we were doing. Despite extensive training and supervision, the quality of the work coming out of the India office was rubbish, full of mistakes and people just not understanding the nature of the job they were being asked to do.

Meanwhile, the atmosphere at work for us in Australia was terrible. We all knew that they were set up for nothing else than shutting our office down, even though it was officially denied at first, that this new Indian office was just extra capacity to cope with the housing boom etc. But eventually it was announced that Australian offices would close with that function to be moved to India, as if it was something new that they'd only just thought of. Staff moral collapsed, experienced staff (like me) started looking for jobs elsewhere and just left. Quality, staff satisfaction, errors, customer complaints - all indicators went sharply the wrong way. The only reason they did it was that they could employ 3.5 Indian workers for the same cost as 1 worker in Australia (my supervisor quoted me the figures, the night we had drinks for his forced early retirement). Whether we we better in terms of error-rate, or more efficient in terms of time taken for completion didn't matter. It was all about cost.

Why shouldn't it be a dirty word?

 

[PottSie2]

Because offshoring, especially in IT, is a false economy.

For example, IBM will promise to do x for 1/2 the price that Company A does it internally.

Great they say, let's go with IBM.

Then IBM will say change y is not covered in the agreement, and will cost $30,000 to design, implement and test. This additional cost was once absorbed by internal staff.

IBM delivers project. Because IBM offshore to churn factories in India, the project has passed any number of hands and minds and is often of shitty quality.

But it's a 5 year cycle. I've been here for 14 years and every 5 years without fail, as senior management changes, so does the IT paradigm.

Outsource
Insource
Outsource
Insource.

The losers ? The staff. Sometime you'll lose your entitlements, sometimes you'll keep your entitlements but have to go to work for the outsourcing company.

 

[Ratts of Tobruk]

Yes - I get to agree with PottSie for once!

Offshoring makes CEOs look good because they come with expected savings. Even if those savings don't eventuate in the long-run they will look good in the short term as staffing costs go down and so do projected costs.

I also wouldn't be surprised if these costs can be differently managed in terms of tax and reporting to the ASX. Foremost, though, its a way to make a CEO look good and it fits with the economic theory that a company should specialise in as few areas as possible, as some other company will be more efficient specialising in things you can otherwise outsource. Of course at the upper corporate level huge multinationals own lots and lots of unrelated companies, but apparently this is fine, and once you have divided a company up you can then start to merge with other companies or bring things back in-house to make yourself look like a go-getter. Shareholders are pretty useless at analysing a company's efficiency, and politicians claim private enterprise is more efficient when basically any entity with a corporate structure is inefficient, so they get away with it.

Having said all that, if you can get away with it, obviously it's cheaper to employ overseas workers. China makes fairly poor quality product but people don't seem to mind as we are a rich country and you can throw those jeans out after 4 months and get the latest fashion. Your lost is their (and landfill's) gain.

 

[Dry Rot]

Agree with all of the above.

Re quality of output, try Telstra tech support or billing in the Philippines. Utter ****ing arse clowns.

End thread.

 

[Geelong_Sicko]

Just some thoughts. On offshoring, and its future as a viable practice - it relies on masses of poorly paid, non-unionised people yes? In order for the practice to continue a suitably cheap labour pool would HAVE to be maintained somewhere at all times.

T-shirts made in India by non-union sweat shop workers are less expensive than uinionised Australian workers. Call centre workers there are 3.5 to every one of ours in cost-effectivenes as Admiral Byng points out.

I know that, as nations develop their economies and working conditions improve, their labour pools become more expensive to maintain and therfore unattractive to multinationals. They 'become' us and they might start outsourcing down the track.

But where does it end? Will cheap labour become an artificially-maintained 'commodity' to keep so-called 'first world' corporations functioning? Is it already so?

 

[Ratts of Tobruk]

That is actually one of the arguments for it. The rise in Chinese and Indian living standards is largely due to us employing them to do our work. If the Chinese weren't artificially keeping their currency down, maybe this work would've moved to Africa (Sth America has a habit of nationalising or workers buying their own factories that profit-driven companies are seemingly adverse to), so yes it is "already so".

 

[medusala]

Well, I've been through it at a previous job. I used to work for one of the big four banks. They decided to set up a back-office processing centre in India, to do the same work as what we were doing. Despite extensive training and supervision, the quality of the work coming out of the India office was rubbish, full of mistakes and people just not understanding the nature of the job they were being asked to do.

This happened to numerous UK based investment banks. Many ended up bringing the work back to the UK as the performance of the Indian operations was so poor.