Outsourcing: A Threat to Australian Web Hosting Industry?

Outsourcing: A Threat to Australian Web Hosting Industry?

The growth of the Internet triggered a fusion of the global job market, enabling even smaller companies to hire employees from different parts of the world or to have their services managed by external teams of professionals.

Although outsourcing is an activity that can bring many benefits to a business, it can have a negative impact on national economy if it becomes too frequent in a particular country.

In Australia, outsourcing has been a popular trend for years with more and more businesses seeking out freelancers to complete both technical and non-technical tasks. Last year, O’Desk reported that Australian companies increasingly use this platform to find international talents to help them with all sorts of business-related activities.

Where is it most prevalent?

According to O’Desk, Australia’s major outsourcing field is game development, which increased by 437% from 2012, along with engineering and technical design (276% increase in 2013) and mobile app development (258%).

While these digits imply Australia’s awareness of the potential in the global job market, they also point to certain problems for the country’s economy. Outsourcing is recognised as a huge benefit for enterprises because it enables them to have different kinds of tasks done by skilled freelancers at low cost. Moreover, this also reduces costs per employee, as it doesn’t require a company to pay for anything else but the requested fee.

According to Matt Cooper, vice president of enterprise and international at O’Desk, Australia is a significant market for the company based on per capita spend, which is almost double that of the U.S. Apparently, there is a huge demand for both technical and non-technical skills, which implies that there is a lack of skills within the country itself.

Therefore, mass outsourcing means that fewer Australian professionals would get an opportunity for a permanent job in a local company, which can negatively affect Australian economy.

Enterprises go offshore

A recent report by IBISWorld suggested that mass outsourcing could particularly affect web hosting industry, where the services are being increasingly done by international companies. This habit, although beneficial for individual companies, resulted in revenue reduction in the Data Processing and Web Hosting Services industry because Australia increasingly relies on offshore companies to provide them with necessary skills and resources. Nick Flores, IBISWorld’s industry analyst suggests:

“Diversified technology companies such as IBM have increased their focus on improving operational efficiencies, which has increased the attractiveness of outsourcing select functions to low-cost countries.”

As noted in the report, the global economic crisis has also contributed to a slowdown in Australian economy, preventing industry leaders from expanding their offering and investing more in hiring local professionals. Considering the fact that the demand for web hosting services is growing, this can be a real trouble for Australian web hosts that intend to establish themselves as global competitors.

It seems that the industry faces a challenging task of keeping up with global trends, which is partly solved by outsourcing. Hopefully, after the crisis period passes, the industry leaders would be able to contribute more to the national economy growth and create more opportunities for the local workforce.