Key takeaways

  • Offshoring has garnered a reputation as being low cost, high volume and poor quality.
  • Today, technology allows business to expand overseas without the problems once associated with outsourcing.
  • Companies wishing to grow sustainably by accessing overseas talent should be looking at new ways of working across borders.

Offshoring. It’s hard to believe now, but once upon a time, offshoring was the word du jour – the next big thing to hit the business world.

Cheap labour, larger workforces, greater output: it seemed the dream scenario for companies looking to cut costs while scaling up. But the concept quickly soured and offshoring became the ugly little secret that customers decried and executives downplayed.

These days, technological sophistication means that the negative associations with offshoring will be relegated to the history books. Digital advances are allowing a new era of cross-border employment, no longer siloing a business into ‘here’ and ‘there’, but extending the one company and allowing it to access scale and talent.

In fact, in many instances, companies simply must embrace this digital extension of the workplace in order to compete.

The offshore

Offshoring has been happening for a lot longer than people think. As early as the 1960s, back-office functions such as accounting and transcribing and typing have been outsourced to foreign soils¹.

It wasn’t until the late 1990s, with the proliferation and technological advancement of fibreoptic cabling, that voice communication revolutionised the practice. The reduced cost of employing staff, and the technology itself, ignited the popularity of sending call centres overseas.

Foreign governments welcomed these hubs as employment for their citizens with tax breaks and other incentives. For a while, it seemed companies had discovered business nirvana, and the internet only accelerated its viability.

Unfortunately, the victims of this model were customers and employees – two groups integral to running a business. Often offshore operations behaved as separate entities, while cultural differences,  language barriers, bad connectivity and resulting customer complaints helped turn offshoring into a dirty word.

The promise of today’s
tech and connectivity

Technology and connectivity are not the same as they were even a few years ago and in a time where agile and new ways of work are taking over, it’s time for a fresh take on the concept.

Digital is allowing for the extension of the workplace. Data is secure and accessible via a company virtual private network (VPN). Internet enabled voice communication and a host of productivity tools means that the cost of collaboration is negligible.

Time zones can be managed with flexible working hours and teams can be as integrated as those in the one location.

When it is possible to ‘go to the office’ anywhere in the world, why should businesses shy away from the benefits of extending beyond a geographic location?

It seems mainly that the challenge is between the ears. Most of us are comfortable working with aid of big and small screens, video hangouts, messaging apps and speakerphones. Increasingly, businesses are embracing flexible ways of working to enable talent to work from home or at individually convenient hours. The 9 to 5, face-to-face workplace is on the way out.

Yet employees remain accustomed to talking to compatriots than cross-border colleagues. It’s time to change that mentality, rooted in the negative rhetoric associated with offshoring and embrace talent and experience to be found worldwide.

The job market
and the need for scale

In some countries, such as Australia, a new way of working is necessary. Despite the desire to engage local talent and support the local economy, companies need to scale to grow, and often the talent simply isn’t available locally². High demand digital jobs such as developers, crucial for companies undergoing digital transformation, become increasingly expensive as the market scrabbles and poaches from the increasingly smaller talent pool.

Compounding this problem, the 2017 Global Innovation 1000 study released by PwC’s strategy consulting business Strategy& found that the spread of economic nationalism and inward focus of many of the world’s governments is causing concern when it comes to innovation. The revoking of working visas and reduction of immigration by these countries is expected to lead to difficulties for the talent pipelines of many companies.

In these instances, hiring externally – and locating that talent beyond national borders – will become crucial.

The secret is
in the approach

The other baggage that has to be contended with is in the implementation. There is no one-size-fits-all when it comes to how a company should offshore. The wrong model can easily lead to trouble in integration and subsequent output issues.

For some, the best solution may be to ‘insource,’ creating an entire branch of the business overseas –  perfect for those looking to establish a dedicated long-term facility in an international location. Yet, the lengthy establishment time, combined with the need for new skillsets capable of dealing with visas, regulation, real estate and so on makes it suitable only to those committed to (and financially capable of) waiting the time it will take to see results .

Companies looking to complete a project with a fixed scope and outcome, may find it makes more sense to fully outsource, for example, by combining key internal staff with a short-term external consulting team. This may mean using the facilities, talent and infrastructure already available overseas, for example, in one of PwC’s local firms. This scenario is much quicker to set up, and costs far less than the first option, however there is the danger of staff becoming siloed from the main company, and limited capability transfer to the company itself.

A third option  is a truly hybrid option, and one we’ve found appeals to many businesses beginning  their journey of extending their workforce overseas. In this scenario, a mix of insourcing and outsourcing allows a company to set up an extension of their business within an external company’s infrastructure. For example, within a PwC hub a company could have its very own home, completely branded and operating under its own culture, but with the additional access to PwC talent and operations.

It won’t happen overnight…
but it will be worth it when it does

Successful execution of distributed project teams rests on integration with a business’ existing structure. Enhancing the experience with rigorous and regular communication over multiple time zones and working collaboratively with the preferred tools of communication will go a long way to accomplishing the goal.

Productivity doesn’t come overnight, and it takes hard work, the right technology and dedication in order to unlock value and velocity. But the benefits far outweigh the drawbacks and in some locales will be the only way a company can remain competitive without downsizing to afford the top talent.

Often it is only the old-fashioned views associated with offshoring that are holding companies back from growth through scale. The technology needed to work in agile ways, across geographic regions, now exists, is affordable and dependable.

Extending a company overseas does require a certain level of courage and business maturity, but with the right investment in tools, capability and a desire to grow sustainably, the rewards are there for the taking.



Monty Hamilton

Monty Hamilton is a former partner in PwC Australia’s Digital Services team.

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