New Zealand and OutsourcingBy

Steven BrownAMR Services.co.nz31st July 2014

Outsourcing New Zealand

I remember getting and eating my first Kiwi fruit in the UK. I was about 16 years old and I didn’t 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 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 my taste but the fruit was excellent. However the fruit was very ripe and juicy and a lot of the fruits juice ran down my school shirt.

Experience of Outsourcing. • Whilst doing the rounds as an Executive Solutions provider in New Zealand I’m often being asked to find “C” level people with experience of Outsourcing.

• New Zealand companies seem to be having their first “taste of foreign fruit” in terms of Outsourcing. Other countries have had their fill of Outsourcing but was it good for them?

• Will it be good for companies in New Zealand?

• Neil Butler the Co-Founder of Optimation 2010 thought that the best way forward for significant growth in NZ was to offshore development work . Keeping Business Analysis and Project Management Onshore.

• 2012 Vodafone ditches Offshoring, creating 100 new jobs. Moving call centres and IT in House, CTO Sandra Pickering said at the time, “It is more cost effective to hire New Zealand IT professionals”

• If this is the case surely this makes NZ a perfect place to become an Outsourcing haven, providing On Shore, Near Shore and Offshoring?

• Some companies like Vodafone need to retain IP over products, services and applications, so Development and Testing was returned to New Zealand and the company that gained substantial testing work in Vodafone was Optimation. The company who had looked to India for everything except BA and PMs?

• Was this 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.

Around the world many other companies who have outsourced their IT are now returning to “In House”.

Vodafone and the other companies cite the reasons as being;• Due to hidden costs of Management Layers

• 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”.

IT developer on Shore could cost $750 a day .off shore country will tell you that they can do this for $100 per day .Whats missing are the hidden costs of translation and the management costs of their developers.

Time spent by your own people translating what was said and what was needed, to what was delivered, enables the On shore developer to be more effective and a cheaper option.

India or the North Shore?

• ANZ in NZ 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 however set up their call centre on the North Shore creating 80 new jobs and for its customers they 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 centre in house, rather than sending it offshore”

• Pete Macauley of Michael Page states “More Australians are considering heading over the ditch". His reason being that job losses has pushed Australian unemployment to a four year high.

Moving to NZ• Having seen an exodus of Kiwis chasing the Australian dream, we now see

Kiwis returning to NZ and Australian companies moving to NZ.

• The mining boom is flattening out in Australia but 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 labour 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.

• NZ and Australia speak English, both are culturally different, but very similar. More like “kissing cousins”. So it's not just cost that becomes a factor, communication and excellent skills make NZ a great place to either Near shore or move to from Australia.

A Down side to being based in NZ.

• Having a HQ in Australia sometimes makes the NZ part of the company the poor cousin.

• Working with several companies in NZ, I see the frustration for the CEOs and Senior Executives.

• I worked with one such company they won lots of work and had a great pipeline of future sales.

• Great 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 projects, whilst 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.

Kiwi Rail outsourcing to China• July 2014, 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 appear increasingly questionable.

• Work on 500 faulty wagons has been taking place for the past two weeks in Picton, carried out by more 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 or KiwiRail and the taxpayer”

Does it makes sense to use NZ for Outsourcing

• Entrepreneurial spirit of a pioneering nation.

• Majority of NZ businesses are SMEs and start-ups.

• Start-ups often have issues with constraints on finance.

• Outsourcing can be an advantage for SMEs and start ups. It is possible to get up and running with a virtual employees such as www.freelancer.co.nz.

• It’s surprising how little you need to build up a multi-million dollar business from a start-up. My last successful venture started from a loan of $3000.

CIO website Seven outsourcing nightmares

• No 1: Outsourcing employee exodus.

• No. 2: Offshore app dev delays shut window of opportunity.

• No. 3: Offshore communications breakdown.

• No. 4: Poor quality, no recourse for refund.

• No. 5: Unexpected overhead of outsourced management.

• No. 6: Metrics without enough granularity to be meaningful.

• No. 7: Downtime and disorganisation.

Why you should use NZ for Outsourcing

• NZ has world class talent in all sectors that for English speaking countries could provide an alternative to the established Offshoring Countries, in terms of communication, cost, culture, and time zones.

• NZ companies need to 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.

• Companies in NZ should look for companies in NZ to Outsource their work to especially for midrange and higher spend projects.

• Good for the economy.

Outsourcing like my first Kiwi Fruit

• 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 also mastered Outsourcing and it no longer becomes messy. For small projects to get people up and running. This is what tastes good for me.

• We do not need to go overseas for everything especially mid range to large projects, the skills and competitive price are here within New Zealand.