Outsourcing - "White Collar Recession"

An interesting article where the banks, insurance companies, telcos, and IT organisations are now outsourcing a lot of the back-end functions. See the article below.

http://www.smh.com.au/business/offshoring-high-price-of-low-cost-20120127-1qlot.html

I agree with Jeff Kennett in the article where Australians are pricing themselves out of the market. In a way it is good that the Outsourcing is happening now...as if it is left too late and wages get out of control the impact later on will be greater. Particularly, if there is not as much as mining revenue to soften the blow.

Whilst, this will be painful...it will be good to nip this in the bud.

Before people jump on me...I work in IT and I can see at the coal face that is hard for companies to make a buck on professional services. The labour costs here in Australia are now among the highest.

For example an average IT project manager makes a about $130k which is about 85k pound sterling or 106k euros. The same positions in the UK are about 55-60k sterling or 70-80k euros. So something needs to change if we are to maintain our continued prosperity.

My view is that the Lower North Shore, Nothern Beaches, and parts of the Eastern suburbs of Sydney are going to have higher than normal unemployment rates shortly. Potentially, this is also going to impact rents. Funnily enough the Western suburbs is going strength to strength.
 
The wage discrepancy is based on the current exchange rate only. Once cost of living comes into it they are similar wages.
 
It's all cyclical. When the boom hits again the white collar workforce will grow and you'll have another rally in the more desirable (Eastern) suburbs. Besides, back office jobs are hardly the cream of the 'white collar' workers...they are most likely to be middle-class workers who live in OK-ish suburbs. A guy working in a crappy call centre job is unlikely to be able to afford a house in the Eastern/North Shore areas.
 
Fear not, my job was outsourced to India 5 yrs ago in Sydney for a big insurance company. I left for 2 years and then returned after they discovered that the IT roles didn't work real well os.
I contracted back to them at double my old wage.
 
For example an average IT project manager makes a about $130k which is about 85k pound sterling or 106k euros. The same positions in the UK are about 55-60k sterling or 70-80k euros. So something needs to change if we are to maintain our continued prosperity.

Pre or post GFC?
 
Dealing with Indians for the last 10 years, at this stage senior IT people have nothing to worry about. They are great at back office roles but generally very poor at client facing roles or senior pm/architecture.
 
Spot on....that is quite correct.

Jobs for Project Managers, BAs, and Soluton Architects are doing well.

But code cutters and technical jobs are easy to outsource.

Overtime companies like Infosys, Wipro, etc. are starting to hire locals to manage this gap.

Dealing with Indians for the last 10 years, at this stage senior IT people have nothing to worry about. They are great at back office roles but generally very poor at client facing roles or senior pm/architecture.
 
Current wages....mostly PM jobs in Sydney are around this mark. I am quoting package including super here.

Pre or post GFC?


I think you will find the Eastern/North shore areas have a lot of hidden unemployment. Mostly people layed from from the finance and professional service sectors. The other thing is with banks tightening lending particularly among the higher priced property...I can't see prices rising significantly. This time around the blue collar skilled workers - i.e. plumbers, electricians will do a lot better than white collar investment bankers.
It's all cyclical. When the boom hits again the white collar workforce will grow and you'll have another rally in the more desirable (Eastern) suburbs. Besides, back office jobs are hardly the cream of the 'white collar' workers...they are most likely to be middle-class workers who live in OK-ish suburbs. A guy working in a crappy call centre job is unlikely to be able to afford a house in the Eastern/North Shore areas.
 
The wage discrepancy is based on the current exchange rate only. Once cost of living comes into it they are similar wages.

The cost of living is the employees point of view. The guy writing out the wages cheque takes into account the exchange rate. A market based exchange rate helps struggling economies recover by giving them a competetive advantage.

It's all cyclical. When the boom hits again the white collar workforce will grow and you'll have another rally in the more desirable (Eastern) suburbs.

It may be cyclical, but I think there is a long term trend. The Australian car industry only survives because of subsidies. I saw a documentry recently about "Fletcher Jones" clothing manufacturer. They only survived for as long as they did because of import restrictions on cothing. Free trade meant that we had to cut the tarriffs on imported clothes. The result being cheaper clothes for Aussies and no local clothing manufacturing. Why? Our wages and employee demands are too expensive.

The whole world is based on a 2 teir wage system. All of us Aussies are in the upper wage bracket, even pensioners are in the top 5% of wage earners in the world. We can only afford as many luxury goods as we have because someone is working for a fraction of our wage to make them. We work 38 hours a week to earn enough money to buy stuff that maybe took 200 hours to make.

The government must not step in and stop progress on these things. When the government props up an industry they are just delaying the inevitable. The more they prop them up the harder they fall when they remove the props.
 
Lol I don't think the white collar back-end people are living in North Shore or eastern suburbs. Perhaps the people who made the decision to fire them.
 
Spot on....that is quite correct.

Jobs for Project Managers, BAs, and Soluton Architects are doing well.

But code cutters and technical jobs are easy to outsource.

Overtime companies like Infosys, Wipro, etc. are starting to hire locals to manage this gap.


IMHO, I've never worked for a PM that I can truly say that they were on top of their game. I work in IT too, on the technical field. I've seen companies out-source the work, the first year or so is quite painful. The good ones from O/S are smart enough to move/migrate, because they are paid peanuts anyhow. At one point, the wages O/S will start to come up as well.

I feel in the end, the business suffers as the worker bees work is cut and outsourced. In the meantime, managers continue to be useless and earn the $$$ because of their BS skills.
 
2008 - a lot of drafting work was sent to India from Perth - mainly contract stuff, OB's etc.

the quality received was such that by late 2008 the concept - across the board - was that keep it local.

our building regulations and local govt requirements are such that it's not about who you know, how much currency is stapled to the back of the application and how many forms are filled out in quadruplicate - it's about the information contained within the drawings.

and that's why all these applications fell over and why they had to re-do it all again.

to top it off, by the end of the "run", the indian companies had cottoned onto what the locals were charging and their prices had risen by 300% to about 10-15% under local fees.
 
I'm also finding that in specialist manufacturing ... local lost contracts to China, only to get them back quick smart after a dodgy couple of containers of product.

Morale of the story is that for run of the mill mass produced junk - China. Specialist maximum quality required, small order - Australia.
 
2008 - a lot of drafting work was sent to India from Perth - mainly contract stuff, OB's etc.

the quality received was such that by late 2008 the concept - across the board - was that keep it local.

our building regulations and local govt requirements are such that it's not about who you know, how much currency is stapled to the back of the application and how many forms are filled out in quadruplicate - it's about the information contained within the drawings.

and that's why all these applications fell over and why they had to re-do it all again.

to top it off, by the end of the "run", the indian companies had cottoned onto what the locals were charging and their prices had risen by 300% to about 10-15% under local fees.

Yes, I agree that Indian wages are rising and I have been told by someone who outsources to Indian that the price is not the main reason for setting up over there but the shortage of available workers here.
 
ah - that would explain why Westpac just sacked over 2,000 and sent their jobs to India ... lack of staff :rolleyes:

Not happy Westpac!
 
This is the reality of a global market.....we will see more of this.

The sooner people adjust the better....other jobs will be created to replace these. People will need to retrain...or else go the way of the Dodo.

I work with Indian resources and they deliver good quality work if you have a proper QA process. The same thing happens with Australian work......and if they is no QA the work is also not so good.

India is the leader in IT & BPO Outsourcing.....otherwise you would have seen HP, IBM, etc. take business off people like Wipro and Infosys. They have refined to the point where they are now setting up in lower cost economies like the Philippines, West Africa, Eastern Europe, Latin America.

This is good for these economies. The redistribution of power from Western to countries like India & China is already happening. People who resist will find that they might have much of future.

Frankly....it is just like investing in property....you need to keep abreast of the market trends to stay on top of your game. Otherwise, you are one trick pony!




ah - that would explain why Westpac just sacked over 2,000 and sent their jobs to India ... lack of staff :rolleyes:

Not happy Westpac!
 
This is the reality of a global market.....we will see more of this.

The sooner people adjust the better....other jobs will be created to replace these. People will need to retrain...or else go the way of the Dodo.

I work with Indian resources and they deliver good quality work if you have a proper QA process. The same thing happens with Australian work......and if they is no QA the work is also not so good.

India is the leader in IT & BPO Outsourcing.....otherwise you would have seen HP, IBM, etc. take business off people like Wipro and Infosys. They have refined to the point where they are now setting up in lower cost economies like the Philippines, West Africa, Eastern Europe, Latin America.

This is good for these economies. The redistribution of power from Western to countries like India & China is already happening. People who resist will find that they might have much of future.

Frankly....it is just like investing in property....you need to keep abreast of the market trends to stay on top of your game. Otherwise, you are one trick pony!

Exactly, totally agree!

The other point to make is corporations and their managements are under intense pressure to increase the bottom line (Profits) or risk their own jobs. Therefore, for management to save their own jobs they have to consider all options.

And usually when there is a choice between saving your own job plus possiblity of earning a decent bonus or risking your job to save jobs of your staff, usually management will opt for the former option.

The bitter truth of capitalism is no different to bitter truth of nature 'Survival of the fittest'. If companies don't adapt in order to continue to be profitable it will sooner or later perish due to competition.

Cheers,
Oracle.
 
Just means that people in Australia need to skill up and actually create things. There's no reason why people should get paid lots of money for doing a pen-pusher job that can be done for 1/3 the cost.
 
I'm also finding that in specialist manufacturing ... local lost contracts to China, only to get them back quick smart after a dodgy couple of containers of product.

Morale of the story is that for run of the mill mass produced junk - China. Specialist maximum quality required, small order - Australia.

singapore and malaysia (malaysia involving more monitoring) any day of the week

japanese are in a different planet but depending on whether or not the product is subsidised it can be too expensive

"specialist maximum quality required that is not out of the box and pretty similar to what is done on a daily basis" - maybe australia

i speak as someone who manufactures and exports a fair few containers a year from singapore/malaysia into japan and who has tried repeatedly to do it out of australia to no avail. the levels of dumbf**kery and entitlement in this country are astounding and part of why manufacturing is dying. we need to adapt and we need to do so quickly.

even a lot of companies in NZ are set up to export and they tend to be a lot more savvy when it comes to such things
 
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