Let’s settle this ‘offshoring’ debate
When people hear the term “offshoring”, the connotations are almost always negative. People conjure up images of warehouses with rows of children punching away at excel spreadsheets, adding machines and industrial fans….LOL
The global economy has thrived in the philosophy of ‘comparative advantage’, going back at least 9,000 years to the day of the Silk Road. Today, international trade is at the heart of the global economy and is responsible for much of the development and prosperity of the modern industrialised world. Your iPhone is made in China, the car you drive is Japanese, the software you use is both developed by people all over the world and hosted in the USA.
The internet revolution, or the industrial revolution 2.0, has enabled industries to evolve the international manufacturing of goods to include services. Cloud computing has enabled organisations to extend their operations to countries outside of their own. Whilst we have been manufacturing goods ‘offshore’ for decades, many are quick to be up in arms when they hear that services are now being offshored, whether it be your IT support desk to your tax return.
So what motivates organisations to expand offshore capability?
- Access to a greater talent pool;
- Extracting knowledge and resources from other jurisdictions;
- Expanding global footprint to enter new markets;
- Possibly wage arbitrage, but less now with the deteriorating AUD.
We’re a global and diverse organisation at SmartBooks Online. Our data entry team are based in Jaiaphur, India. Our Australian team is made up of accountants, a tech dude and a couple of interns. Our office is based wherever an internet connection is exists – co-working spaces, the home office or sometimes the pub.
We term ourselves an internet business, not an accounting firm. I think you agree that the former sounds more sexy.
Our ‘Offshoring’ Journey
The story behind our ‘offshoring’ journey wasn’t intentional. It started with posting a few adverts on Upwork to find a bookkeeper to assist with the maintenance of our own family bookkeeping. You know, the plethora of entities you set up in your early 20s – the Family Trust, holding companies, SMSF which you use as investment vehicles and you conveniently forget about until the ATO issues late lodgement penalties. I’m sure you can relate…
The responses to the adverts were a mix of freelancers from around the world – India, Philippines, Bangladesh, Cananda, Sri Lanka and our backyard Australia. Most of them CPA qualified, University educated, even Masters Degrees.
We trialed a handful of bookkeepers and had mixed results. Some were amazing, others downright sucked. We learnt that through trial and error. For the good ones, we were amazed with the quality, turn-around times and eye for detail.
Process, Process and Process + CULTURE
Four months down the track, after setting up a company, website and a little word of mouth, we had client numbers in the double digits – and it was hectic.
Whilst we had some processes documented in excel spreadsheets, workflow quickly got out of hand. Working 60 hour weeks at our day jobs then going home to review bookkeeping work wasn’t sustainable, so we employed some help.
We employed two Australian based bookkeepers to assist with account management (reviewing work, processing payroll, chatting to clients etc.)
…both who left us in the space of 6 months.
Why? A few reasons:
1/ We didn’t have an onboarding process for our new staff;
2/ We didn’t have well documented internal processes; and
3/ We didn’t build a culture.
Points 1 and 2 were painstakingly rectified with a lot of man hours, customer journey and process mapping and documentation, combined with software integration.
Point number three was something we couldn’t write a process for.
Building a culture in a business takes work from leaders. It starts with setting the core values of the organization and ensuring everyone is living and breathing them. It takes an enormous amount of effort and energy to set the culture of a firm, and we quickly came to realise that.
And it started with the relationship with our offshore team.
Our relationship with our offshore team was previously very transactional. We’d log in our workflow system, they would do the work, it would be reviewed by our account managers and it would repeat every month. All communication back and forth was via email. Initially this worked, however as we scaled, error rates were beginning to creep up, rework time was mounting and we had limited clarity within the business.
It took us months before we came to realize all of these issues could be resolved with improved and more frequent methods of communication. Slack + regular Skype meetings fundamentally changed our business. We found we were operating more as a team and provided an avenue for everyone to communicate at a deeper, more personal level. Whilst our processes and general business improved, the most profound effect was that we were building a culture.
My view on the whole offshoring debate is this…
While it was traditionally about cost cutting in back-office functions, offshoring has become far more complex and its uses continue to evolve.
For anyone that has trodden down the offshoring path, you realise that there is no ‘offshore versus onshore’ team – your organization works as an integrated unit. Your offshore staff are simply an extension of your team and have benefits that extend well beyond product or services.
The benefits to us of having an offshore team are this:
1/ We now have established processes to work in a 100% distributed/remote environment, allowing us access to a talent pool outside of Australia;
2/ We have capability to expand into new jurisdictions (our offshore team is knowledgeable of federal and (certain) state taxes in the USA);
3/ Tax deductible holidays…I mean business trips…
Despite the range of opportunities that offshoring offers, there is no silver bullet. Like ever new venture, establishing such a process requires a lot of preparation capital and time investment. We made every single mistake possible in our offshoring journey, but then again we’re a lean and agile startup so we can afford to fail fast. This process requires commitment and endorsement from your entire firm.
The term ‘offshoring’ needs to be changed to ‘Distributed Teams’ – because that’s the reality for organisations. There’s no offshore or onshore staff members – we’re all people and all part of one team.
And we can all benefit.
By the way, this this is Gaurav – one of our team members in Jaipur. This is him Paragliding in Oludeniz on his recent holiday to Turkey with his wife.