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Next Wave of Offshoring, Driven by SMEs

This article is a 4 minute read. You will read about:

  • The article discusses how SMEs in Australia are increasingly using offshoring and outsourcing to grow and compete
  • It cites data from Deloitte, McKinsey, and Staff Domain to support the benefits of offshoring and outsourcing for SMEs

  • It highlights the Philippines as a preferred destination for offshoring and outsourcing among Australian SMEs

  • It lists the advantages of the Philippines, such as skilled workers, cultural compatibility, government support, low costs, and economic growth

The next wave of offshoring and outsourcing will be driven by small and medium enterprises.

Offshoring and outsourcing are not new concepts for Australian businesses. For decades, many large companies have been sending work overseas to take advantage of lower costs, access to talent, and increased efficiency. However, in recent years, a new trend has emerged: small and medium enterprises (SMEs) are increasingly embracing offshoring and outsourcing as a way to grow and compete in the global market.

According to a report by Deloitte, SMEs account for 97% of all businesses in Australia and contribute 57% of the country's GDP. They also employ 68% of the workforce and are responsible for 35% of Australia's exports. However, SMEs face many challenges in the domestic market, such as rising costs, skills shortages, regulatory compliance, and customer expectations. These challenges have been exacerbated by the COVID-19 pandemic, which has disrupted supply chains, reduced demand, and increased uncertainty.

To overcome these challenges and seize new opportunities, many SMEs are looking offshore for solutions. Offshoring and outsourcing can help SMEs reduce costs, improve quality, access new markets, and innovate faster. For example, a recent study by McKinsey found that Australian companies that generate more than 30% of their revenue from overseas outperform their domestic peers by 2.5 percentage points in total shareholder return.

One of the most popular destinations for offshoring and outsourcing among Australian SMEs is the Philippines. The Philippines offers many advantages for Australian businesses, such as:

  • A large pool of skilled and English-speaking workers
  • A similar time zone and cultural affinity with Australia
  • A stable and supportive government
  • A competitive cost structure
  • A fast-growing economy

According to Staff Domain, an offshore staffing provider based in the Philippines, the number of Australian SMEs that outsource to the Philippines has grown by 40% annually since 2016. Some of the common functions that SMEs outsource to the Philippines include accounting, customer service, IT, marketing, and administration.

Offshoring and outsourcing can provide significant benefits for Australian SMEs, but they also require careful planning and execution. Some of the key success factors for offshoring and outsourcing include:

  • Having a clear strategy and vision for the offshore or outsourced function
  • Choosing the right partner or provider that aligns with the business goals and values
  • Establishing effective communication and collaboration channels
  • Providing adequate training and support for the offshore or outsourced team
  • Monitoring and measuring performance and outcomes

Offshoring and outsourcing are not just for big corporations anymore. They are becoming an essential part of the growth strategy for many Australian SMEs. By leveraging the opportunities and advantages that offshoring and outsourcing offer, SMEs can enhance their competitiveness, resilience, and profitability in the post-pandemic era.


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