This document discusses outsourcing trends in New Zealand. It notes that while outsourcing to offshore locations was once common, some large New Zealand companies like Vodafone have begun bringing those jobs back onshore due to higher hidden costs. The document argues that for mid-sized to large projects, New Zealand offers a competitive alternative to offshore locations in terms of communication, cost, culture and time zones. It suggests New Zealand companies should consider outsourcing to other New Zealand firms to support the domestic economy.

1. New Zealand and Outsourcing
By
Steven Brown
AMR Services.co.nz
31st July 2014

2. Outsourcing New
Zealand
I remember getting and eating my first Kiwi fruit in the UK. I was about 16
years old and I didn’t know what to do with a fruit that was brown and
hairy?
Should I peel it, cut it or bite into it. What would it taste like? I was told
that it was an excellent fruit and that it had all sorts of goodness and would
be good for my health.
The taste was described as tangy melon with a hint of sourness. I just bit
into the fruit, skin and all to find that skin was not to my taste but the fruit
was excellent. However the fruit was very ripe and juicy and a lot of the
fruits juice ran down my school shirt.

3. Experience of Outsourcing.
• Whilst doing the rounds as an Executive Solutions provider in New Zealand I’m often being
asked to find “C” level people with experience of Outsourcing.
• New Zealand companies seem to be having their first “taste of foreign fruit” in terms of
Outsourcing. Other countries have had their fill of Outsourcing but was it good for them?
• Will it be good for companies in New Zealand?
• Neil Butler the Co-Founder of Optimation 2010 thought that the best way forward for significant
growth in NZ was to offshore development work . Keeping Business Analysis and Project
Management Onshore.
• 2012 Vodafone ditches Offshoring, creating 100 new jobs. Moving call centres and IT in House,
CTO Sandra Pickering said at the time, “It is more cost effective to hire New Zealand IT
professionals”
• If this is the case surely this makes NZ a perfect place to become an Outsourcing haven, providing
On Shore, Near Shore and Offshoring?
• Some companies like Vodafone need to retain IP over products, services and applications, so
Development and Testing was returned to New Zealand and the company that gained substantial
testing work in Vodafone was Optimation. The company who had looked to India for everything
except BA and PMs?
• Was this a “sign of the times”, or was it that they had found that as a New Zealand company they
now offered a better Outsourcing model.

4. Around the world many other companies who have outsourced their IT are now returning to
“In House”.
Vodafone and the other companies cite the reasons as being;
• Due to hidden costs of Management Layers
• The physical communication to get things done.
A traditional offshoring country will try and sell “apples against apples”, when they are really
“apples against oranges”.
IT developer on Shore could cost $750 a day .
off shore country will tell you that they can do this for $100 per day .
Whats missing are the hidden costs of translation and the management costs of their
developers.
Time spent by your own people translating what was said and what was needed, to what was
delivered, enables the On shore developer to be more effective and a cheaper option.

5. India or the North Shore?
• ANZ in NZ 2013 offshored jobs to India.
• This was argued by the unions and they were told it was done to increase profits. Given the
banks’ profits at the time it made no sense to the union or the people who lost their jobs.
• Canon NZ however set up their call centre on the North Shore creating 80 new jobs and for
its customers they felt happier that they could speak to someone from their own country
rather than offshore.
• Canon's country manager Mike Johnston said at the time “Superior customer service is a
priority and a point of difference for the company. It makes good business sense to manage
the contact centre in house, rather than sending it offshore”
• Pete Macauley of Michael Page states “More Australians are considering heading over the
ditch". His reason being that job losses has pushed Australian unemployment to a four year
high.

6. Moving to NZ
• Having seen an exodus of Kiwis chasing the Australian dream, we
now see Kiwis returning to NZ and Australian companies moving to
NZ.
• The mining boom is flattening out in Australia but it is still cheaper
to get work done in NZ than in Australia, by about one third.
• Australia's cost base has become too high and NZ has cheaper
labour costs and cheaper electricity.
• IBM, Heinz, iiNet, lumo, Quickflix, L’Oreal, Australia’s third largest
bank and Fairfax Media have moved jobs over to NZ.
• NZ and Australia speak English, both are culturally different, but very
similar. More like “kissing cousins”. So it's not just cost that becomes
a factor, communication and excellent skills make NZ a great place to
either Near shore or move to from Australia.

7. A Down side to being based in NZ.
• Having a HQ in Australia sometimes makes the NZ part of the company the poor cousin.
• Working with several companies in NZ, I see the frustration for the CEOs and Senior
Executives.
• I worked with one such company they won lots of work and had a great pipeline of future
sales.
• Great company with an excellent reputation. The CEO and staff never hit their bonuses.
• The reason being they had too much work and had to use extra Resource. Instead of using
external NZ Resource they had to use HQ people from Australia.
• This meant that there costs became too high and the NZ operation made a loss on projects,
whilst HQ made a profit and earned their bonuses.
• The NZ operation part of the company lost two successful Country Managers, from being
the poor cousin.

8. Kiwi Rail outsourcing to China
• July 2014, Otago Times reported on KiwiRails outsourcing to China and
asked the question was it worth it?
• “Ongoing issues with KiwiRail's controversial Chinese-made freight
wagons are making the state-owned enterprise's decision to award the
building contract overseas appear increasingly questionable.
• Work on 500 faulty wagons has been taking place for the past two
weeks in Picton, carried out by more than a dozen China CNR
Corporation staff and a team of translators, working under the
supervision of KiwiRail staff.
• At least some of the work is on brake components. However, the
obfuscation, rhetoric, semantics, claims and counterclaims between
unions, politicians and KiwiRail in the long-running saga make it difficult
to establish whether the work involves ''repair'' or ''upgrades'', whether
it should be expected, and whether the full costs of all work so far are
being borne by the Chinese manufacturers or KiwiRail and the taxpayer”

9. Does it makes sense to use NZ for
Outsourcing
• Entrepreneurial spirit of a pioneering nation.
• Majority of NZ businesses are SMEs and start-ups.
• Start-ups often have issues with constraints on finance.
• Outsourcing can be an advantage for SMEs and start ups. It is
possible to get up and running with a virtual employees such as
www.freelancer.co.nz.
• It’s surprising how little you need to build up a multi-million dollar
business from a start-up. My last successful venture started from a
loan of $3000.

10. CIO website
Seven outsourcing nightmares
• No 1: Outsourcing employee exodus.
• No. 2: Offshore app dev delays shut window
of opportunity.
• No. 3: Offshore communications breakdown.
• No. 4: Poor quality, no recourse for refund.
• No. 5: Unexpected overhead of outsourced management.
• No. 6: Metrics without enough granularity to be meaningful.
• No. 7: Downtime and disorganisation.

11. Why you should use NZ for
Outsourcing
• NZ has world class talent in all sectors that for English speaking countries
could provide an alternative to the established Offshoring Countries, in
terms of communication, cost, culture, and time zones.
• NZ companies need to have complete control of their finances,resources
and understand the offshore trade off. Look at NZ first, you may be
pleasantly surprised, especially for midrange and higher spend projects.
• Companies in NZ should look for companies in NZ to Outsource their
work to especially for midrange and higher spend projects.
• Good for the economy.

12. Outsourcing like my first Kiwi Fruit
• Outsourcing in the beginning was like my first kiwi fruit, very messy.
• Having had several experiences with kiwi fruit I have learned to slice the
fruit and scoop out the inside getting the fruit part that tastes good to
me.
• Even better is to make them into ice blocks!
• I have also mastered Outsourcing and it no longer becomes messy. For
small projects to get people up and running. This is what tastes good for
me.
• We do not need to go overseas for everything especially mid range to
large projects, the skills and competitive price are here within New
Zealand.