New Zealand Goes from Film Set to IT Outsourcing Hub Credit: Image credit: Rego - d4u.hu via Flickr
Outsourcing

New Zealand Goes from Film Set to IT Outsourcing Hub

New Zealand’s changeable, harsh, and ruggedly beautiful terrain has been an actor in its own right in many significant films of the 20th and 21st centuries.  Films like Avatar, Heavenly Creatures, The Piano, King Kong, The Chronicles of Narnia, Underworld, the Lord of the Rings and, more recently, The Hobbit have all used the country’s scenery as a canvas and propelled the nation, once only known for its butter, into the world spotlight.

With its small population of 4.4 million, New Zealand’s contribution to technology was eclipsed by its five-times-larger neighbour Australia.  Most Kiwi kids who develop any specialist skills brace themselves for a future overseas to seek their fortunes.

Many Europeans confuse New Zealanders and Australians. The two are in fact significantly different but closely tied countries and have a friendly rivalry which normally plays out on the rugby football field. New Zealanders will describe themselves as “civilised Aussies” to English people who think the two countries are linked. Now it seems that rivalry is set to become more marked as New Zealand becomes the hub of a South Pacific IT outsourcing operation which many see as having the potential to rival Manila or India in that part of the world. "Offshored" jobs are fuelling New Zealand's new economic growth and reversing the traditional migration to Australia.

Peter Scott, one NZ database developer who has travelled through the US, UK and Ireland, is now back in the capital Wellington because “that is where the work is now”.

“When I started my career, there was no work here that could pay you anything like I was earning in the UK,” he said.  “It still doesn’t but the quality of life is much better here and the cost of living is lower.”

He is not the only one.  Although the exodus to Australia has been particularly bad over the last three years, New Zealand Employment Department statistics show a marked slowdown in Kiwis leaving for Australia for the first time this year.

The reason for this is that Australian businesses are finding that there are some major advantages in outsourcing IT operations to New Zealand.

Fairfax Media, which publishes some of Australia's biggest newspapers, has moved some parts of its business to New Zealand, where it could effectively edit Australian newspapers more cheaply.

In June, Michael Stutchbury, editor-in-chief of the Financial Review Group at Fairfax, told readers that there “was nothing wrong or new with offshoring”.  

Call-centre operations have been the first to be established. The most obvious reason for this is the shared language and the two countries having similar cultures. Not to put too fine a point on it, Australian racism is a growing problem; particularly outside the major cities where some Australian customers will not talk to a “non-English” person.

Not only are the time zone differences easier to live with, New Zealanders and Australians share a lot of the same idioms and grew up with the same references.

New Zealand communications company Telnet, which runs a call-centre business, has found that its work from Australia doubled this year to roughly 20% of its total business as more firms shift support-centre operations to New Zealand.

Telnet managing director John Chetwynd told ABC recently that New Zealanders speak the same language as Australians and the two nations were used to doing things together. 

Dan Turner, chief executive of Unity4, another outsourced contact-centre services provider that opened in New Zealand about six months ago, recently told Reuters that there is little cultural stress or tension “apart from when the rugby's on”. But that is par for the course, really.

For New Zealand’s centre-right government, the fact it is that attracting Australian businesses is an endorsement of its more free-market approach.

The National Party’s Finance Minister, Bill English, created an international incident recently when he claimed that the New Zealand economy was doing better than Australia’s. This, English claimed, was because New Zealand had less restrictive labour laws than Australia, which made life better for businesses.

His point was that an Australian company could save a third of its costs by shifting to New Zealand. This is important, as the Australian economy could be headed towards its first recession in 22 years, thanks to its mining boom drying up.

Minimum wage costs alone are higher in Australia. While the Australian minimum wage is US $15.32 per hour compared with a minimum wage of around US $11.20 in New Zealand, this is all due to tight labour laws, government red tape and high tax rates.

Trans-Tasman communications links between the two countries are good, and flights between the countries are fairly quick. Kiwi IT links are on a par with, if not better than, those in Australia. Unity4, for example, was able to link its call centres into a home networking cloud on the strength of the local broadband infrastructure.

New Zealand's economy is booming thanks to earthquake reconstruction projects in the South Island and its high-tech manufacturing and IT sectors are also expanding. All this is making New Zealand a compelling option for Australian companies to shift their IT and call centre operations across the pond for the first time.

 

Nick Farrell is a freelance writer who was born in New Zealand and recently migrated from Bulgaria to Italy. He writes widely on technology, magic and the esoteric.

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Nick Farrell

Nick Farrell is a freelance writer who was born in New Zealand and recently migrated from Bulgaria to Italy. He writes widely on technology, magic and the esoteric.

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