Outsourcing is Good!

New Zealand suffers a 'Skills Shortage'. The Government says so, and so does business.

New Zealand suffers from low productivity. The OECD says so. And so does business.

These, and other statistics, are related.

New Zealand is a small economy with a small population. As it seeks to evolve from being a low value, primary / commodity goods economy to one that is knowledge-based and capable of competing with international competition, the growing pains are real. And so are some of the responses.

Even though many businesses cannot expand because of the unavailability of skilled labour, business leaders often view outsourcing (and particularly offshoring) at best, as unrealistic; at worst as unpatriotic. In the USA and the UK, outsourcing and offshoring are viewed as an essential tool to grow a business and manage resources.

There is some evidence that NZ manufacturers are now viewing outsourcing and offshoring as a necessity. The strong dollar has probably helped that mood, particularly amongst exporters. The same should apply to the service sector.

I declare an interest. I am currently talking to a NZ-based company about offshoring some development work to Bangalore. The upshot is that their inability to outsource this work locally is having a major impact on their development plans. Without an updated application they cannot grow. And they cannot find a NZ development company with the skills to do this, in the timescale required.

Outsourcing and offshoring for them is the smart thing to do. They get an application to meet their requirements AND they get to grow their business. With no end to the current skills shortage in sight, such partnerships not only help individual businesses to grow, but also bring wider benefits to the NZ economy as a whole.

Global relationships are built and new opportunites appear. If the price of an overvalued NZ dollar is to force NZ businesses to look to outsource and offshore some of their work and so develop overseas relationships, then maybe long-term, it is a price worth paying.