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Outsource magazine: thought-leadership and outsourcing strategy | April 30, 2017

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I love a sunburnt country, a land of sweeping plains...

I love a sunburnt country, a land of sweeping plains…
Martin Conboy

As I write, it’s early Saturday morning on the October long weekend. I am flying in a SAAB 340 turbo prop over southern New South Wales on my way to Melbourne from Wagga Wagga.  My travel plans, coincidentally, are intermingled with the Australian Rules Grand final, which is being played for the second time in as many weeks between St. Kilda and Collingwood. The flight would normally have few passengers – however, due to the sports event, it’s full of fans making their way to be a part of the 100,000 people who will actually get into the Melbourne Cricket Ground to see the game live. The game was a draw last week so they have decided to have a replay. If you have never experienced Grand Final week in Melbourne, do yourself a favour and put it on your list of things to do in life. It’s a very unique experience. Melbourne is the world champion city for footy madness.

As I look out the window from about 10,000 feet I can see that the land is very lush green and there are patches of vivid yellow fields of canola. Normally it’s a yellow and dirty brown matrix, so it’s unusual to see such a vigorous contrast. The Snowy Mountains are off in the distance to the east. It’s a beautiful spring day with little puffy white cotton wool clouds. As I zoom along I am reminded of how lucky we are to live in Australia. The drought has finally broken, the dams are all full again and rural and regional Australia is thriving. We will have record harvests across the board and – given agricultural failures especially in Russia – it looks like our farmers will get record prices for our primary produce.

We have full employment and I notice an increase in activity around our 457 skilled migrant intake visa program. Restocking of our domestic herds and flocks will push domestic food prices up in the short term, but apart from that it’s all bubbling along quite nicely. The government will raise interest rates to slow down inflation so that the economy does not overheat. Given that we are selling everything that we dig out of the ground to China, keeping the brakes on our economy is a real challenge for the government.

It’s great to see outsourcing companies like Salmat spreading their wings setting up operations in places like Wagga and taking advantage of the upswing in the rural and regional economy.

Our dollar is currently trading at US$0.97 – almost parity with the US dollar. It was not that long ago when it was US$0.55. If you have noticed a lot of Australians lately in your neighbourhood, you’ll know why: our dollar has increased its purchasing power dramatically and it’s currently school holidays. An annual migration period for Australians to spend their recently received tax refunds.

Australians are spending their improved value dollars and are going in droves to Europe and America and Asia. In economics, when one thing goes up something else must go down. Australia has suddenly become very expensive to travel to. I am reminded when the British & Irish Lions rugby team toured here a few short years ago with the Barmy Army, the taunting chant from the football terraces was, “Three of yours to one of ours – do dah – do dah!” Well, how the wheel has turned! Exporting from Australia just got harder.

Needless to say the strength of our currency has not gone unnoticed by our Asian neighbours and we ourselves are coming to terms with how much more compelling is the business case for outsourcing to less expensive Asia. Our dollar is now buying 42 Philippine pesos; this is up from 32 pesos, and so if the exchange rate was a principal driver to offshore with savings of 30% relative to the fully loaded cost of an agent hour in Australia, it suddenly got an awful lot better.

In the last few months we have seen a surge of interest in BPO and we have witnessed an influx of Asian-owned BPO operators setting up shop in Australia with a view to tapping into this awareness. It makes sense as their Asian-based facilities, which are geared to work at night to cover the US and European markets, can finally work their operations on a 24-hour basis by servicing markets in the same time Asia-Pacific zone such as Australia.

So, in summary, the stronger Australian dollar is making the case for buying offshore BPO services even more compelling, especially if they are paid for in Australian dollars. It’s the same reason that Australian holidaymakers are racing overseas to spend their Australian dollars – they are now worth more in foreign exchange terms. Thus BPO projects – especially those that are destined to end up with an Asian vendor – suddenly got considerably less expensive and financially a lot more attractive for Australian companies.

(For the record Collingwood won by 10 goals.)

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