Controversy and enthusiasm over the idea of offshoring business processes may have died down considerably, but Martin Conboy believes Australian companies are missing the boat when it comes to cutting the cost of key business processes.
He's not the first to goad Australian businesses for being relatively conservative in their adoption of business partners overseas, but he may be among the first to do something about it.
Conboy - who for more than a decade grew brainchild callcentres.net into a call centre research business - is this week opening the doors on FooBooOnline.com, a new consulting business designed to vet offshore companies and provide a local liaison for Australian companies interested in the model (for the trivia-minded, the name comes from Front Office Outsourcing Back Office Outsourcing).
"It has become clear that offshoring is not some isolated blip on the economic radar screen," Conboy said. "Companies have a fiduciary responsibility to reduce costs, improve efficiency and improve customer service. Offshoring allows them in part to meet those obligations, especially since many companies have reached their prudential limit in taking costs out of their business."
With offices in Singapore and Sydney, Conboy and partner James Haensley have moved to capitalize on the growth of the exploding Asia-Pacific offshoring market, where companies in India, China, the Philippines and everywhere in between are creating banks of employees just waiting to take customers' calls.
All hope to tap into a growing trend that IDC has predicted will grow at 14.4 percent annually, to be worth $US14.7 billion by 2009 in the US alone. Globally, the offshoring market is estimated at $US18 billion, with around $US14 billion of that going to India.
While many such companies may lack the business acumen and stability necessary to make them viable long-term partners, Conboy says many others are extremely well run under the auspices of US and UK-trained MBAs. Many such companies have geared themselves up to service customers in US and European time zones, but want to fill their spare capacity during their daytimes.
The promise of tapping into excess service capacity puts Australian companies in a good position, but the challenge for Australian companies is telling potential offshore providers apart and ensuring they deliver on expectations. Through a standardized vetting process, FooBooOnline is building a register of regional companies capable of handling call centre, development, consulting, technical support and other types of work.
Even with the assistance of an intermediary like FooBoo.com, however, companies still need to do their own investigations, warns Gartner analyst Rolf Jester, who says offshoring has been "growing rapidly" but accounts for just 3 percent of Australian development. Organizations outsourcing locally should allocate between 3 and 8 percent of their project budget to managing the deal, he says, while the increased risk of overseas engagements means this figure should increase to 8 to 12 percent of the budget.
"Just as potential buyers of these offshore services would do their due diligence even on a service provider down the road from them, they've got to do that even more when dealing with someone based in another country," Jester says. "We are definitely aware of companies that have failed to achieve the benefits they were looking for, in the first place because of unrealistic expectations all around. Well-managed companies can save 25 percent or more of the cost; poorly managed, they could have a total disaster on their hands."