Outsourcing, The New Paradigm in Productivity?

Michael Porter at World Economic Forum.

Business Strategy Guru, and Harvard professor, Michael Porter defines productivity "As the value created in a days work" and emphatically says "The value created in a days work sets the wages you can earn". How true! You couldn't articulate individual, organisational or national productivity any better. Any more clearer.

Outsourcing can help increase value created in a days work and it is my belief, organisations who strategically outsource its low value, mundane, or non core tasks can significantly increase its productivity, if done well.
By outsourcing non core activity it allows greater focus on higher value creating tasks within the organisation, the acute specialization of a firms value chain. Staff can be moved / retrained to focus on higher value creating, higher fee earning business, working closer to the customer. Companies that outsource will grow not shrink, and as they grow will create more, higher value employment opportunities contrary to to popular beliefs of increasing unemployment.

The acute specialisation of value chain achieved by outsourcing will also help firms be stronger and to withstand tough market conditions due to inbuilt efficiencies. A lot more resilient than those who are slower to move. Apple, Virgin and the major Australian banks are some of the best examples, even the global financial crisis, the worst economic times we have ever seen, they grew and all made multi billion dollar profits when hundreds if not thousands of less efficient firms were going to the wall.

Yet the words, outsourcing or outsourcers, spell fear in most ranks within firms and nationally. Most feel initiatives to outsource will increase national unemployment. When computers were being widely introduced in corporate and government organisations in the 80's and the 90's we had the very same fears. We feared that computers would take our jobs away. We would lose control of our departments and our organisations and security would be significantly weakened and compromised.

When we now look at the paradigm of efficiency brought about with advent of computers, it is cleat that unemployment which averaged around 5.2% in 2012 is nearly half of the 9's, 10's & 11's we were experiencing most of the 1990's. Computers helped transform organisational productivity and change the paradigm of work itself, in the private and the public sector. Today we can't operate without computers even in our homes let alone at work.

If you talk to a firm of accountants today about outsourcing their mundane work, the work their staff have their head buried in, their usual fears are loss of control, security and jobs. This is no different to our fears with computers back in the day. It is the same if you speak to most firms about outsourcing their software development or the mere maintenance application software. I well remember how a CFO asserted to me in the mid 80's "these computers will take away our accounting jobs and we will have no training grounds for young accountants". I wasn't brave enough to tell him as a young consultant his fears were unfounded and he was wrong but history has proven so. Especially considering the importance, and the growth of the accounting profession today. It is the same for many other professions and industries.

Outsourcing if done well, with clear objectives, implemented with skill, can bring in significant improvements in productivity and value creation for all types and sizes of organisations. Small, medium, big, and the public sector. If done badly for the wrong reasons, unclear goals or implemented poorly it will be like those bad computerisation projects we have all heard of and know. The blame we often leave with the outsourcers or the software providers and not where it belongs

If we as employers embrace outsourcing we can help our staff move up the value chain, adding greater value and creating increased opportunities for income and efficiency. I was one of those people that helped usher in computerisation to firms in the mid 80's to the 2000's.  Today I believe outsourcing   can help strategically transform organisations and its competitiveness. Like anything, to do it successfully, you need to do it right and for the right reasons.


Dinesh De Silva is CEO of Nexgroup Asia Pacific, he and his team are available to speak to media /  organisations or groups as a keynote / guest speaker on the above. Contact him +612 8003 3342, via twitter @dineshdesilva or www.nexgroup.com.au 

NexGroup Asia Pacific, is a World Class Outsourcing business, providing Software development & Accounting, Finance and Legal BPO Services. 

Australian ICT Services Industry - The Opportunity

As a keen analyst of the Australian ICT industry, I see huge gaps in the market place and significant opportunity for the strategic, yet savvy IT Services organisations prepared to chart a new and somewhat a different course.

The consolidation that has happened in the last 10 years have created new opportunities with formidable industry players being gobbled up both in the applications and in the Infrastructure sphere. It has happened in the Enterprise & the Mid Tier market place.. creating a the vacuum, in fact a huge vaccuum.

Out of the gaps I see the greatest is in the mid tier enterprise and commercial market, which is commonly described in the industry as 500-3500 seats. Australian corporations between 500-3500 desktops/laptops/workstations. These gaps have been caused by many including, Volante after the acquisition of it by Commander, the self destruction of Commander it self a few years later, Acquistion of Alphawest by Singtel Optus a few years earlier,  a lame KAZ (& Aspect) after its acquisition by Telstra and several other smaller mid tier players acquired by the likes of Oakton, SMS, UXC and others. Another segment of the market has departed due to poor management, lack of funding, economic circumstances or a combination. Entropy is I guess the law of nature yet is speedened up by poor management and turbo charges by poor management (case in point Volante after Commander acquisition).

While the top end space is well looked after and is fiecely competed in, by the likes of IBM, EDS CSC, HP & a few Indian firms, namely TCS, Infosys & Wipro. I believe the sector below that is some what neglected and will have significant opportunity for a dynamic and robust company with a sound customer centric , talent focused approach to the market. Such a company will attract abundant talent from several large and inflexible organisations that have become lazy, inefficient and often incapable in the practices of real human talent management. HR has become a much delegated function with no real teeth or integrity in many IT organisations in this country.

Good talent will always attract great customers in numbers as the delivery of quality professional services need talented, committed and passionate people, not just bodies, certifications and methodology.

Customers are sick of cost over runs on projects, mediocre service, poor advice, and often uncommitted people, and the constant barrage of sales people, selling the same commoditised products and services with little or no differentiation, not understanding the customers business, adding little or no strategic value to the corporation just eating up valuable time of executive and management by countless unproductive meetings..

I am surprised how just a few IT services organisations have architected and modelled their internal organisational structures around the client organisation, while the majority stick to product centric silos that are designed to "push" product yet prove vastly counter productive due to lack of alignment with client organisations. The resultant internal competition and bickering that happens between these silos create huge inefficiencies, reduction in focus and add significant cost to customer. The consolidation that has taken place in the industry in the last 10 years and the resultant internal focus due to understandable behavioural issues over territory and jobs haven’t helped here.

It wasn’t long ago the top end of the market was dominated by IBM, EDS, CSR followed by HP, Fujitsu and Unisys in the enterprise sector. Yes that was until HP acquired EDS in May 2008, and Fujitsu acquired the Telstra owned KAZ in March 2009. Yes, Kaz was a respected mid tier player who had built a solid reputation until Telstra. Kaz were well positioned to dominate the mid tier sector, then Telstra acquired the company infused it with Telstra management and completely changed it's culture and with that it's competitive edge.

I believe the time is nigh. For dynamic organisations and investors to rise up and take advantage of the opportunities created, I believe there is several hundred million dollars of value to be created if not a billion. It will however take vision, new thinking and good management. It will most importantly take courage. The courage to make the tough calls when cross roads are met, cross roads where courageous leaders will not compromise when it comes to treating its customers and its people right.


Dinesh De Silva is CEO of Nexgroup Asia Pacific, he and his team are available to speak to media , organisations or groups as a keynote / guest speaker on above. Contact him +612 8003 3342, via twitter @dineshdesilva or www.nexgroup.com.au 

NexGroup Asia Pacific, is a World Class Outsourcing business, providing Software development & Accounting, Finance and Legal BPO Services.

Technical Skills : Java, Microsoft Dot Net, PHP, Python, Ruby, C#, Android, Iphone,  CA Service Desk, CA ITSM,  CA NSM,, Spectrum, , eHealth. 

Outsourcing Include : Offshore & OnShore software development, Software maintenenace, Outsourced developers, Offshore Accounting ,  Bookkeeping,  Online accounting,, Account Payable outsourcing, Offshore accounting, Legal Process Outsourcing  (LPO), Legal Services, Paralegal Services, Litigation support, Document Review, Offshore Legal Processing, Legal Research, Legal resources