Currency crisis could affect offshoring arrangements

The global financial crisis and a weakened Australian dollar could affect local organisations’ offshoring arrangements, according to an outsourcing researcher.

Anne Rouse, associate professor of IT and Business Strategy at Victoria’s Deakin University, told The Australian that firms entered into long-term outsourcing arrangements under certain assumptions and if they changed, the business case could change radically. “The Australian dollar has plummeted and it makes the differential between us and overseas change quite a lot, so it is possible that the business cases, which were based on an Australian dollar close to US$1, are not going to justify outsourcing,” Rouse said.

“Even when you outsource offshore to countries where salaries are substantially lower than Australian salaries, the transaction costs of co-coordinating with those countries means you are probably going to be saving 20% to 30%, if you are lucky,” she said

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