Ignorance about global resourcing is a threat to business

It can sometimes be a frustrating experience trying to help people understand a relatively new concept, and how it’s going to impact them and their business.

I was a panellist this week at a peer mentoring business group, and one of the participants (Jan) had a website business. Jan had a good little “mum and dad” business, nice and busy and with happy clients (some of whom were in the room). Buying technical services is confusing for many people, so they often feel comfortable buying from a person they feel they can trust rather than a larger business.

However, Jan was looking to grow the business and to add a wider range of services, and it was apparent that she couldn’t do much more herself before she needed to add staff. She was already doing an 80+ hour week caring for a young child and working in the business.

So I mentioned to her that although right now she said she can’t afford to hire an Australian graphic designer, she could afford to hire a great designer offshore. In shedding that load, she could then focus more on product development and marketing of the new products to grow the business.

Her response was: “I never outsource because my clients don’t like that”.

I’m actually encouraged by businesses that actively choose to make their businesses 100% Australian, I think it shows courage. However, when that decision is made out of ignorance, all I see is a business heading for doom.  Let me tell you why I see it as an ignorant answer.

Firstly, her use of the phrase “outsource” immediately tells me that this business owner has not researched the possibilities with global resourcing. She would have no idea that some global resourcing models allow for hiring and managing staff in exactly the same way that local staff are hired and managed. Thus it isn’t ‘outsourcing’ at all, and there is no loss of control over the business process – it’s simply hiring staff in another country. Of course, there are some things to learn before it will work effectively.

Secondly, the point about clients not liking when a business has offshore staff; this is a concern for almost every single business who enters the room to one of my educational seminars. But six years of research, testing, observation and cataloguing successes and failures with offshore teams has taught me that the fear simply isn’t true. Your clients don’t care about accents; they care about bad service. Your clients don’t care about working with foreigners; they care about working with poorly skilled people or people they can’t communicate with.

I can explain this in more detail when not limited by this article length, but suffice to say that there ARE answers to this common concern, and you can hire skilled, articulate staff and create business processes to integrate an offshore team and delight your customers with great service. 

But the assumption in Jan’s response is a killer. I hear almost every day a variant on that phrase “my clients would leave me if I started offshoring”, and almost without exception that opinion is based upon the prejudices and assumptions of the business owner, not upon any actual facts or customer data.

Did Jan survey her clients to ask them? No, of course not. Instead she has overlaid her own past experiences and beliefs and made that decision FOR her clients.

So what happens when businesses refuse to accept this assumption or when the business owner or CEO does not have those prejudices? They end up with massive competitive advantage, and the comfort of knowing their competitors are going to take a long time to catch up.

I told Jan about another web-related owner I met only two weeks ago. Carlo lives on the Gold Coast and has a sizable business of 21 staff, he is not Australian born, but has lived here for more than 15 years and certainly sounds Australian. The business produces websites as a side product to their core business of search engine optimisation (SEO).

Carlo’s primary role in his business is to interface with his clients. He meets them in their office, talks to them about SEO and digital marketing, and earns their trust. He tells them about the amazing team of 20 other staff that he directs to produce great results for clients. He signs the client up for some SEO and perhaps a new website.

Once he has left the meeting, he briefs his team and they get to work. The design and delivery of the solutions are done entirely from the Philippines. Carlo doesn’t ‘outsource’ anything – he prefers to have full control over each process within the business, so he selects and hires the staff that he wants, and works with them directly. He has managers offshore too, who manage smaller groups of staff within the team. A couple of key staff are tasked with project/client management and talk to and email the client on a regular basis. Carlo will also call the client every quarter to make sure they are happy, adjust services if they are not, and to look for other opportunities.

This business model is one that I wrote about in my book The Third Wave – Micro Globalism. It retains only the front line roles in Australia that are necessary to make the customer feel like buying, and to manage the client relationship.

Right now Carlo is just maximising his profit, and earning a lot more per job than Jan is – he isn’t interested in starting a price war. But when the price war does start, he is in a VERY strong position and he is well aware of that. 

I told this story to Jan and also mentioned that she needs to have a strategy to deal with this. If it is important to her to have a 100% Australian model, then in the near future she is going to need to find customers that actually care about this and are willing to pay between 30% and 300% more money for the privilege of buying Australian. Bear in mind the difficulties of the promotions too, when Carlo could also correctly say his business is 100% Australian owned, even though he employs no Australians.

If a competitor started approaching all your clients offering them an equivalent product, for one fifth of the price, how confident are you that your clients would prefer to stay with you because your business is 100% Australian? 

Ignorance around offshoring is a huge risk for businesses right now. Without exception, you already have competitors that are doing some part of the business offshore. When I ask for a show of hands in a room of 50 small business owners, around 30% are actively exploring offshore. Interestingly, the figure is only around 15% in a room full of medium to large businesses turning over more than $10 million.

Whether you set up a team offshore or not, it is clear that you need to understand how the business world is changing, and make this choice actively, from a position of knowledge, rather than as a throw-away line from a position of ignorance.

Scott Linden Jones has built several businesses in the IT industry since 2002. He is the founding advisor at Easy Offshore (www.easyoffshore.com.au), providing offshore educational and implementation services to Australian businesses.