Offshoring Concerns

Could offshored jobs be coming home?

Offshoring Concerns

Image courtesy of Wikimedia Commons

The trend among insurance companies to offshore jobs has incensed the broking community and has left some questioning their relationships with those efficiency-driven businesses, but this fad could be much more short-lived than feared.

The latest situation to rile the industry is QBE’s plan to create 700 roles in the Philippines. The insurance giant admitted it would affect jobs in Australia, North America and Europe but local job losses were just 39 in mid-June. That has left many wondering if the future really does lie in offshoring.

Recruitment Consultant Ivan Micallef is analysing the USA to understand the future of Australia’s labour market.  Wages in Asia are rising annually by as much as 20%, prompting US businesses to onshore. In January, Walmart pledged to buy $50bn of American products over the next 10 years and Apple plans to manufacture more notebooks in the States.

Micallef suggest that in the next five to 10 years, Australian businesses will do the same.

“It won’t be cheaper to offshore in 20 years’ time. India and China are developing at an alarming rate and with that, so do salaries. Why send your resources overseas if it costs the same in Australia?”

According to an offshoring report by the National Institute of Economic and Industry Research, the proportion of “jobs at risk” in finance and insurance sector is almost twice the rate for the services industry as a whole. More than 3,000 jobs a year over the next two to three decades are said to be at risk.

Rob Dawson, CEO of global recruitment company Staff.com, is convinced the offshoring trend will show no sign of abating.

“We could see insurers offshore their entire companies,” he adds. “A lot of communication is done over the internet whether it’s between Sydney and Melbourne or Sydney and Singapore.”

The obvious lure of offshoring is lower labour costs but there are implications, too. “It takes longer to get offshoring off the ground. In most cases there is an intermediary who acts as the go-between the business and offshored staff,” Micallef said. “That person has to translate the company’s requirements to the people and make sure those requirements are met. It could take twice as long to get an offshored project off the ground and be quite costly. You could argue that offshoring takes more work than onshoring.”

Micallef points out companies also risk losing clients, unhappy that their longstanding contacts have been replaced. “It undervalues the employee and the client.”

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