Massive offshore shift in Accounting and IT is accelerating - Easy Offshore
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Massive offshore shift in Accounting and IT is accelerating

Massive offshore shift in Accounting and IT is accelerating

I wrote about this in early 2013 in my book “The Third Wave”, warning that it was the next inevitable stage of globallisation and it was due to impact almost every business in Australia.

In some industries it’s already happening. In the IT industry our research indicates there is already a downward pressure on hourly rates. I created a different brand in competition to my own business, just to test the theory. That brand is profitably charging ONE THIRD the price of my 13 year old IT services business, which charges industry averages. I’m now refocusing that low cost brand on providing managed IT services to IT providers themselves to help them adapt. What will their do when average hourly rates for IT services drop from $150 an hour to $75 an hour? That’s less than cost price for local staff.

It’s already happening too in bookkeeping and accounting. The typical market rate for bookkeeping services is around $60 an hour plus GST. At that price, accounting firms have not been keen to do bookkeeping work for years (decades?), because it’s a loss-making service. At this hourly rate it instead feeds a large industry of sole traders, micro businesses and franchises.

Forward-thinking accounting firms are now charging $30 – $50 an hour for bookkeeping, and bringing back in-house all the bookkeeping work they have tried to avoid. Why? Well now it’s become a high margin product, when they are paying around $10 per hour, AND they can control the quality of output.

So the entire bookkeeping industry is about to go through a massive transition, lead by the accounting industry. These firms will use it as a lead product to attract new business clients; it’s very appealing to clients to HALVE their bookkeeping costs. Bookkeeping franchises are doomed unless they take this bull by the horns very quickly.

There are many other industries this is happening in, but IT and accounting share some similarities. Firstly they both mostly sell services, and the skills to provide those services are readily available outside of Australia.

Secondly, the tools used within the industries have already made it extremely easy to connect offshore staff. Look at the Xero revolution and the new MYOB products – cloud platforms are perfect for collaboration internationally. Even those who still prefer the Handisoft or MYOB AO style of software with server-client installations, often they are now either hosted on a Private Cloud platform, or have servers and fast internet connections for remote workers to easily connect.

IT business have used PSA tools, project management systems, monitoring tools, video conferencing tools, and remote support tools for close to a decade, and these systems are heavily integrated into most IT services and development firms. Both Accounting and IT have accelerated the adoption of global resourcing because their services delivery models and their collaboration methods are already perfectly suited to it.

Thirdly, the wage differentials between Australia and somewhere like the Philippines are enormous. It typically costs one fifth of the wage for an equivalent skillset. (Some people will tell you one ninth but in my experience that only applies to very low end admin or call centre work – high end skills are around one fifth.) This means not only is it cheaper to deliver your existing services, but it’s actually cheaper to deliver a BETTER service.

So what is your business doing to adapt to these changes? They aren’t going away, in fact they are speeding up. Somewhere between 50,000 and 100,000 new roles will be hired in the Philippines alone by Australian firms this year – another record year after the last 4 record years. The majority of these hires will be by SMEs, who long ago realised they were not “outsourcing” anything – rather they are building strong offshore teams, much like building a team in another Australian city.

Expect to see advertising very soon for competitors who are charging between 30% and 50% less than you. They will be the ones who did their research a few years ago and took action to protect the future of their business and the future of their key Australian staff.

Offshoring is not a switch – you can’t just instantly have a brilliant offshore team, and in fact the more you rush it, the more likely you are to fail with it. So realise that many of your competitors have been preparing, and when the time comes for you to take the step that it will take you time and effort to implement. If you leave your run too late, you will be under pressure because you’ll be losing clients in the meantime. I know we all like to think that our clients love us and would never leave us, but 50% is a hell of a motivating force.

Wouldn’t it be prudent to at least understand what is happening in your industry? Even if you decide to change nothing?

If you would like to hear how global resourcing is changing your industry, how “outsourcing” has evolved to be something very different, get all the highest quality providers’ contact details, and how to protect and expand your business with our independent blueprint, come to a seminar in a capital city near you. Enquire about the free introductory session.