Rethinking the offshore model

The IT offshoring industry for Australian businesses is at a turning point. What began as a small-scale for many Australian SME businesses dedicated to software and application development, addressing a range of business processes and technology services have now become almost a necessity.

New challenges in Australia have emerged. Increasing pressure on margins, Australian businesses need to anticipate changes in costs—and avoid sharp movements in local market conditions eg higher wages, labour shortages, and inflation.

Offshore delivery centers can ease the planning burden by adding new geography to the business portfolio—ones that offer more stable economic profiles or whose market movements counteract those of the Australian market. Doing so allows businesses to hedge their exposure to risk and makes managing costs more predictable. Such considerations form the basis of strong portfolio planning.

When a business has a local team and an offshore team, it is easy to consider them as separate entities. However, the use of two sourcing locations can create valuable network benefits in the form of improved governance, process standardization, workflow transitions, and contingency planning. When coordinated well, the whole is often greater than the sum of its parts.