Dispelling the myths of distributed delivery in 2024

In this article we thought we would have a bit of fun and challenge some of the perceived barriers to establishing an offshore capability supporting an Australian business. It’s an interesting and dynamic environment where fixed views can be formed, and they don’t always align with current realities. So here goes! 

Challenge 1: The costs of overseas delivery are escalating. 

Yes, particularly in some of the more mature offshore delivery locations.  But with the world going through more challenging times, costs have stablised or reduced in many locations.  In terms of future increases, you can now cap increases at 5% or less per annum. Typically, we see between a 50% - 70% cost reduction for technology resources business process roles, so it's going to take a long time for overseas costs to equate to anything close to Australia, where the latest wage growth figures have hit 4.2% per annum. 

Challenge 2: AI will take over many of the roles I might offshore. 

It might over time, but unless you have a clear strategy and plan to realise this in the next six months, there is still benefit in transitioning the roles and managing any automation as you move forward, enabling you to bank the 50% to 70% savings and other associated benefits now.  Automation and AI execution can then occur later to capture the balance of the saving.  A good business case will help with making the call. 

Challenge 3. We don’t have enough transactional roles to make it worthwhile. 

Another COVID dividend is that international companies, at scale, have moved value adding roles offshore, and now many geographies, such as the Philippines, have huge workforces that deliver such capabilities.  We have a catalogue of nearly 100 roles being performed effectively from overseas for Australian companies, many of which are not purely transactional in nature. Examples include social media buyers, business intelligence analysts, graphic designers, integration engineers and scum masters.

Challenge 4. You can’t do the role from overseas. 

There is no doubt some roles can’t be performed from overseas, generally those requiring face-to-face customer or supplier contact, or retail presence.  However, if COVID taught us anything, it’s that the majority of roles can be performed effectively remotely.  We spend time with our clients posing the question "if you were setting up this business anew, where would you locate your resources?".  The answer is consistent – "not all in Australia". 

Challenge 5. Our customers won’t accept overseas service support. 

We have worked with clients where NPS has immediately improved when customer service capabilities are moved offshore.  There are a couple of strategies that can be employed to help this: 

• Select the right geographic location as some have natural advantages over others in supporting the Australian consumer. 

• Focus on moving chat and email correspondence overseas first, followed by phone when comfortable. 

• Leverage some of the cost saving realised to significantly improve the level of service provided.  This can be executed in areas such as extending service hours and improving call response times at very little cost, and consequently positively impacting NPS. 

Challenge 6. Attrition will be 30%-40%. 

It's true that with some outsourced models this is the case.  However, our experience is that with an engaged captive workforce, attrition rates should be achievable for many roles at @ 3%-5% per annum.  It requires effort from Australian leadership to engage, involve, and motivate overseas teams, but leading practice has overseas attrition significantly better than in Australia. 

Challenge 7. Their English language skills aren’t good enough. 

Different geographies have different levels of English proficiency.  It is definitely harder to find a high average standard of English proficiency in Vietnam vs the Philippines.  However, not all roles require a high level of English proficiency, so having a location strategy that delivers the appropriate level of proficiency for the role is important. 

Challenge 8. They're in a different time-zone. 

This is a massive advantage particularly for customer service, as service hours can be extended easily.  The reality for geographies such as the Philippines is: 

• Employees will align to Australian hours at no premium. 

• Activities such as technology development can benefit from extended hours and capacity, as Australian resources can hand off activities to their overseas counterparts to complete outside of Australian standard hours. 

Challenge 9. You are negatively impacting Australian jobs. 

Some roles will be impacted – yes.  But Australian unemployment levels have been low for 3 decades, and in that time tens of thousands of roles have transitioned offshore.  Additionally, the companies we work with simply can’t find the skills they need in our constrained labour market.  In this current environment companies who transition roles offshore are delivering enhanced performance as a result and underwriting their own longevity by using this lever.  They are now in a better position to grow when the economic environment becomes more favourable, and that growth will benefit both onshore and overseas jobs. 

We look forward to sharing more of what we have learned on this subject in further articles. If you would like more information on this topic, please contact neil@alchemypartners.net.au.