Even some of the big companies are struggling

This article may be the beginning of the end for Yahoo. It is definitely not winning against the giant google. You have to wonder what the loss of 1000 jobs will do to the remaining employee’s morale.

And it may be my brain but with such a dramatic cut in resourcing you have to wonder what on earth were the 1000 employees doing that doesn’t need to be done now? Either they have been wasting space for along time, or Yahoo’s productivity will slow.

Back after a long holiday break

I am finally back on board after a nice long break away in the sun. Rather than make my brain work first day back I have found a couple of interesting articles from the last few days about outsourcing and 2008. There is a definite push towards outsourcing over the last few years and looks set to continue into 2008.

I think 2008 will be a year where outsourcing will mature quite substantially. People are getting used to the idea now and work on building up quality of service will begin with gusto. Anyway here are a few links to start the year off with.

1) IT at the heart of India’s development
2) NZ named as alternative offshore location for 2008
3) Outsourcing Pummels offshoring in IT budget plans
4)Knowledge process outsourcing to grow in ’08, says UK group

Acquisitions or Offshoring – The battle begins

Computerworld published the this interesting article recently. It compares Axon’s announcement that over the next few years they will be on the acquisition path for businesses that will help grow its position in the industry. Compared to Geni’s decision to start discussions with offshore outsourcer Tech Mahindra.

Geni appears to be driven down this path by Telecom. It is good to hear Geni talking about close discussions with its clients on this path, it could be rather damaging to them if they just announced the change over. Geni has in recent times also spoken about the lack of suitable talent in New Zealand to cover its growth needs.

Both approaches have merit. Axon is right to realise that the ICT market is rapidly converging. And the acquisition path has merit. Over the last few years IT and Telecommunication companies have been bedding into their market and a few of these companies might be prime for the picking.

I have seen the consolidation of the IT market gather pace in the last few years as smaller companies become part of larger companies. So Axon maybe on the right path. However they may have entered the acquisition market a bit on the late side.

Outsourcing on the other hand has plenty of merit too. Especially on Telecom’s (Geni) bottom line. Unfortunately my gut feeling is that this is a directive from the juggernaut Telecom rather than from a recruitment or customer service driven directive.

I say that because over the last few years and the next few years, Telecom’s market share will be severely dented. Rather than invest in making themselves different they are looking at cutting costs. How can we keep squeezing more out of what we have rather than change.

I am a sceptic, Telecom is not my favourite company. Lets hope I am wrong for their customer’s sake. If I am right though, what was once a great IT company in Geni, will be a company struggling to stay a float in a few years.

The digital age … Job losses & Job gains

Two articles of interest have popped up on the stuff website today that are of interest.

1) BBC to cut 1800 jobs as it confronts digital age

2) 11,000 more IT industry jobs by 2011

There was a lot of talk years ago about how technology would threaten jobs and that it would become harder and harder to get a job. I suppose technically this statement is right. Technology is a threat to jobs. However based on these two articles it is obvious that this statement needs to be added to.

“Technology will threaten jobs that can be duplicated easily, and grow job opportunity in other areas”.

If you consider the record unemployment rates that are all over the globe & the challenge of finding good people. I would have to say that more jobs are being created by technology than lost.

CTU wants a higher minimum wage

An article in Stuff yesterday talks about the CTU (Council of Trade Unions) election campaign to get the minimum wage raised to $15.00 per hour. While I am all in favour of people earning as much as they can, this idea has very far reaching ramifications.

The CTU also talks about pegging the minimum wage to two thirds the average wage. While nice in theory to peg the minimum wage to the average wage, what it will do is will drive up the average wage further. Add to this the Green’s thinking that it will help pull people out of poverty.

This whole method of thinking in my opinion is seriously flawed and here are some reasons why. Firstly if the minimum wage was to increase, as a natural consequence the price of purchases will also increase. And the prices of purchases will probably rise higher than the increase in minimum wage will.

This purchasing price raise will keep those on the minimum wage in poverty. The cold hard fact is that if you are on the minimum wage, you are at the poverty line, regardless on how high this is raised. A better idea is to pour all that extra per hour money into training. Pull people above the minimum wage not lift the minimum wage.

Another major flaw in this theory is that at $15.00 per hour employers will think twice about employing people. They will look first at streamlining the systems they have. One obvious answer is to outsource or send overseas work that can be done cheaper elsewhere. Therefore the number of minimum jobs available will reduce substantially. Ultimately business isn’t a charity and profits driven. If the pressure to pay for unskilled labour becomes to high, they will stop using unskilled labour.

The final flaw I see in this theory is that for the employees themselves, there is no incentive to better their lives. The mentality will become “The government will grow my wage for me”. Anyone that does not get above having a minimum wage mentality will always struggle. The extra dollars per hour should be invested into building up their skills so that they are more employable at the higher rates, rather than force employers to pay higher.

The biggest outsourcing news of last week

Both the stuff & NZ Herald websites have articles on Vodafone’s call centre move to Cairo last week. A rather large announcement. You can find the articles here & here. This is big news for the industry. Not only because it is such a big call centre move, but also because of the suggested reasons behind the move.

It will obviously have some dollar saving attached to the move, however the main reason stated was the difficulty in finding call centre staff. This poses an interesting question. Was it that there wasn’t enough staff in Auckland, or New Zealand? Or was it that there wasn’t enough staff at the hourly rates that Vodafone was willing to pay?

I will be interested to see how the level of service goes. Will the change to Cairo improve quality or decrease quality. I thought it was interesting to see that Vodafone has chosen Egypt as the country of choice. There is a general ground swelling of dislike for the Indian call centres, because of the language differences.

My gut feeling is that Egypt would have a higher level of understandable English than the likes of the Indo-Asian countries. But I am not an expert in this of course.

The other nice thing to note is that Vodafone has announced that there won’t be any redundancies in New Zealand. This maybe a short term strategy or more likely long term. There will probably be a slow ramping down of the New Zealand operation over time I imagine. But I suppose that will depend on how well things turn out in Egypt.

An article stating the obvious, but a good read

Computerworld today has published some thoughts on the skills shortage in the IT market place. It is an article well worth a read. You can read it here. People hiring technical people are increasingly finding it difficult. I found it interesting that this article points to the more technical skills being the hardest to find.

Part of the reason that the more technical skills are harder to recruit for that hasn’t been mentioned is that those with more mature skill sets see the advantage and capability of contracting. They understand the value of their services and can get more income & flexibility through contracting.

This isn’t necessarily a bad thing. One area that Professionals on Demand is putting a lot of time and energy into is how we can help companies find and hire and retain these contractors. It is about facing up to the fact that it is happening, and then finding a vehicle that will allow companies to tap into these resources easier.

TUANZ question, is outsourcing good for NZ long term?

A post on the TUANZ blog recently asks a good question of outsourcing. Is it a short term saviour in a tight labour market? Or is outsourcing a long term threat?

My answer to this question is done right it can be a saviour short term & extremely beneficial long term. The threat that TUANZ suggests is that it can “rob New Zealand’s industry of its ability to develop a dynamic sector in this country”. I suppose technically this is true.

However I would liken all outsourcing to the trend in manufacturing. Eventually most manufacturing will be sent offshore simply because of costs & economies of scale. The call centre industry is already taken. New Zealand can’t compete with the likes of India. So even if New Zealand companies wanted to outsource their call centres to New Zealand they would lose out in cost.

The other thing is that the call centre environment is an area that has become commoditised. There are plenty of people that can do it and do it well. That is why India and the Philippines can be competitive in this market. There are definitely those that do it better than others, but the fact that it is relatively easy to do makes it a target for developing nation.

So where are the benefits to New Zealand’s industry long term. Outsourcing is exactly the same as inside a business. The CEO doesn’t have hands on to every aspect of their business. They delegate to other managers. Outsourcing needs to be seen as another manager.

When outsourcing becomes another branch of management, it naturally frees up head space. New Zealand companies can then focus on product research and development and sales.

A great article on the gap between tertiary and the real world

Computerworld has reported on the 25th conference on tertiary-sector ICT which carries some messages that make a lot of sense to me. You can read the article here. There are a couple of points of interest worth exploring further.

The first paragraph talks about the gap between what students learn and the things practiced in the workplace. My belief is that this is not only true of ICT but also of many other areas of Tertiary education. We have a graduate marketing person working with us at the moment. It is interesting how some of the basic theories and ideals taught in university are very different to application in the real world.

The second important point that this article mentions is that the shortage is not actually about applicants, rather about suitable skills. This obviously relates very closely to the first point. And it is quite possible that Tertiary institutions are at fault here because not enough real life experience is added to the courses.

The third and most interesting point to me is the paragraph that states

Applicants typically have “grossly inflated expectations” both in pay and in the nature of the work they think they will be doing.

In the IT industry in particular this is definitely a very true statement. Many graduates have a false expectation that they will be able to slot into a high pay packet without paying the dues in an actual working environment.

I saw this with one particular person in the marketing industry. She spent 3 years getting educated in marketing and business. This person was actually very good and had a natural nose for the industry. However she still had to do the 2-3 years hard yakka to get any credibility. Unfortunately her expectation was that she shouldn’t have to do the job experience because she had just spent 3 years at university.

Education is valuable, but ultimately it is experience that allows a person to sell themselves for the higher rate.

La-z-boy heading to china too

Another manufacturer following the footsteps of Fisher & Paykel and Click Clack and heading off shore to china. See the NBR article here. In my role as a sales person, I call many people from many industries. Lawyers and accountants used to be the tightest & hardest people to get through to. I think these days, manufacturers are starting to head right up that list as well.

If you are pinching every penny to make a profit, you need to change how you do business or go out of business. I suppose that is why so many manufacturing companies are heading to greener pastures. Good luck to them.