Good on Tom Pullar-Strecker for ferreting this out in today’s DomPost, where he reports that Indian technology giants Tech Mahindra and Wipro are bidding for a huge information technology outsourcing contract at Telecom in competition with IBM and Hewlett-Packard, according to a report from Mumbai. There’s no doubt Telecom are looking at a potential very big outsourcing move which could take large numbers of Kiwi jobs offshore.
I just happened to have also been sent the article I think he based his story on which says that India’s top outsourcing vendors Tech Mahindra and Wipro, apart from multinational rivals IBM and HP, are currently in discussions with Telecom for a contract potentially worth up to $1 billion and plans to cut costs and improve profits by outsourcing non-core IT work.
All in line with information I’ve been given previously, which Telecom has been denying.
Two weeks ago Telecom announced it was axing 200 managers, mainly from Telecom Technology and Telecom shared services. It is my understanding that those jobs represent a workforce of between 1000 and 2000. There are a myriad of projects and other jobs within Telecom that will be affected.
Last week we saw Telstra Clear announces it will cut up to 170 call centre jobs in Christchurch and Paraparaumu to outsource them to the Philippines. Unrelated, but part of an ongoing and worrying trend.
Acrosss the ditch yesterday we saw Telstra announce it was axing 900 operations employees responsible for installing and maintaining the telco’s infrastructure networks, saying technology has made the roles redundant.
Telecom is contemplating massive change. I think they should come clean becasue there’s so many jobs at stake. I also think the government should pay attention. This is our telecommunications infrastructure.
Kiwi jobs!
{*}
T
Kiwi jobs good, off shoring bad.
Is any pressure being put on Key to commit (I’d prefer he was committed but never mind) to any rail carriage building being done by Kiwis? Media seems to be quiet on that.
ASB use having their call centre in NZ as big advertising point. Globalisation means that it is logical to out source some low skill work but surely it is in Telecom’s interest to at least pretend to be an NZ company. Lots of people make provider choice on that perception and whether they can understand the person at the other end of the phone.
I’d take this a bit more seriously if labour hadn’t rushed into an FTA with China that will allow Chinese to bur Crafar farms and import a Chinese labour force to work them.
The FTA with China has killed manufacturing in NZ.
I think we are the only country dumb enough to have an FTA with China!
Now the govt is looking at an FTA with India.
Why is it now Labour is on the other side of the fence are they trying to defend kiwi jobs when they started the problems in the first place?
Well, lets not miss this glaring point: 25 years ago, India was a much poorer, much less developed, completely under-infra-structured country with too many mouths to feed, reliant on horticultural and agricultural economic output.
Today they are bidding on IT and technology support work globally and competing against American giants like HP and IBM.
And where has NZ come in this same timeframe? Why isn’t NZ doing the same now, selling advanced services and advanced industrial output around the world, competing with the IBMs/HPs/Accentures just like India has positioned itself too?
NZ must get with the programme. And NACT isn’t going to do it their fussing about redistributing bits of the same small pie with GST rises taking with one hand and other tax dollars being returned on the other hand – or mining rocks and shipping them overseas is simply inadequate.
(Now, an experienced S/W developer in India might earn the equivalent of just NZD$20,000 per year but consider this – dealing with native English speakers from a similar western culture means that you can solve technical problems and develop software far faster. Its about getting the same value job done in less hours, not about being paid less per hour).
When HP NZ (and worldwide) started massive redundancies and outsourcing roughly two years ago, there was very little reported on it. Word on the inside is that this practice has continued, and possible accelerated.
However, given they got some bad press in NZ (though not much, and IBM certainly got more for cutting their coffee machines!) they are no longer publically or even internally announcing redundancies.
Perhaps a policy Labour might want to look at in the future is making companies over a certain size required to announce redundancies over a certain percentage of their workforce?
Just an idea…
@ Mark – you conveniently ignored the fact that manufacturing in NZ has been declining for a long period of time (since the 80′s) and certainly before the emergence of China as a manufacturing superpower, and certainly before the signing of the FTA.
And of course Mark, you would prefer not to have access to markets in countries where one medium sized city has more consumers than the whole of NZ. That’s so brilliant.
Basically if you don’t understand the causes how can you come up with useful solutions?
How are we going to replace that 1 billion of exported capital, it amounts to the entire wine earnings, NZ would need another industry of this size just to hold our own on the external deficit. Time to buy Telecom back.
Aussie banks export a billion of NZ capital every 3 months…our brilliant officials thought that possibility was OK when they approved the sales.
Native English speakers with a similar cultural background may be able to develop the solution faster but would it be fast enough to offset the difference in total paid? Personally, I doubt it.
@ Draco – actually if cost is the only determinant then it is a tough sell, yes. On the other hand, Apple and Microsoft still do plenty of coding and development in the US where costs are far higher than NZ. As long as cost is not the only determinant I think we have a gap we could close.
Clare, your post illustrates Labour’s economic policy dilemma. Only a couple years back, you guys signed the China FTA knowing full well that would mean low skill jobs heading off shore, and today you guys are moaning about low skill jobs heading off shore. I just don’t get it. You guys embrace the FTA while waving the ‘jingo’ flag. No wonder the public is confused about Labour.
I do wish Labour would acknowledge a change of direction and mistakes of yesterday. But in saying that, I think Labour needed to come out of power in order to reinvent themselves. While I applaud this reinvention some acknowledgement of what they did wrong would be nice.
But back to the matter at hand. It has been considered a viable option for years to contract the work offshore. I had misgivings of this when I was learning about it at tech. A friend of mine even suggested that NZ would end up with it’s people “driving taxis”. i.e. those jobs that can’t be moved offshore. It’s a grim picture. If unemployment goes up, no one is then able to afford all of those services that are moving offshore, the intelligent getting out as there’s just no reason to stay in New Zealand anymore.
So, if we look at the good of the country over the good of those businesses (and one ties in with the other) then we need to keep as many jobs as humanly possible in New Zealand. We’re a welfare state and are dependant in no small way on the majourity of the population working.
I think people do have a tendancy to look at the FTA from one side. On one hand, it could be the final nail in the manufacturing industry in New Zealand. On the other hand, it’s an unimaginable]y big market to get into. India has THE fastest growing middle class out there. That means, businesswise, it’s a fantastic market to get into, if you can get into it – of course, there are all sorts of copyright gotchas in that market but still, everyone wants in.
So, with the FTA’s – do the benefits outweigh what we lose? I’m against any FTA with America for this reason – compromising our liberties in order for big American companies to flood the market with horribly manufactured goods/services (Starbucks springs to mind as something that’s come over here, displaced alot of independantly owned cafes with a manufactured atmosphere indistinct from any other Starbucks all over the world) is not in New Zealands interests and I don’t see how it can be pretended that it will be good for New Zealand. China and India however, they don’t ask us to compromise our liberties in order to trade with them.
Regards,
Nevyn.
I appreciate the point you are trying to make Clare, although I find the focus on New Zealand jobs to be too narrow. We live in a global community, and given that we are very fortunate to have basic levels of support for our unemployed I find it difficult to believe that jobs being moved offshore is a bad thing in the global context. If there is a net loss in jobs, then this is something to be concerned about. But given that India and the Phillipines are relatively poor economies jobs in these countries must be a good thing. This us versus the rest of the world nonesense has to stop.
Joshua: We should be interested in how we can actively use the dynamics of the global market place to benefit our immediate community – New Zealand.
And of course it IS us versus the rest of the world in many senses: what is our relative competitiveness, our relative levels of technology, skills, capabilities and stable investment capital.
And don’t forget, for a philanthropist like yourself, that charity starts at home.
BTW – when neoliberal free marketeers extol the virtue of global economic growth by letting jobs go here or there, they are really extolling a system which help the big multinational corporations to grow and get rich, and not the countries that those corporations operate in. Do realise that.
Loota – I agree with your first comment, but the “dynamics of the global economy” that you mention means that jobs go where the greatest efficiencies are to be gained. The opening up of world trade has opening up sector of the NZ economy to international expansion, while others have suffered because another country has the better “relative levels of technology, skills, capabilities and stable investment capital.”
However, i disagree that charity starts at home. For me, charity – or if you have read my posts you would know that the appropriate focus should be on empowerment – flows (it does not begin not does it end) to where it is needed.
Your 6:12pm comment is overly-generalised. Yes there are multinationals who enter a country and exploit its resources without putting anything back, yet at the same time there are companies who enter a country with the desire of mutual benefit. This world is not black and white as your comment seems to suggest. Do realise that.
Pretty simple really, what goes around comes around. After Labour shafted them over unbundling Telecom are highly focused on restoring profitability and this is what’s necessary.
If Labour wanted to unbundle the loop they should have negotiated a fair price to buy it back first.
Making stuff in NuZild is an area that many kiwis relate to and have a sense of regret that this has diminished over the years with the loss of the manufacturing industry. I shared a coffee with a Ponsonby Road cafe owner this afternoon who was once a factory manager in a New Zeland shoe factory. His factory was one of the first to go when the changes came after 1984.
His comments all these years later indicate that he is still passionate about manufacturing and exporting manufactured goods. The manufacturing sector of course in past decades was also a real bedrock of Labour party support.
Keeping kiwi jobs kiwi has to involve the development of employment intensive industries. Dairy farming and resource extraction ain’t going to cut it. The challenge is translating the desire to be “can do” to “am doing” in the 21k world.
It is easy to say New Zealand is not going to be a mass market manufacturer. Yet, where would Finland be without Nokia? Perhaps many Nokias are now made in China. Other posters may be able to confirm if this is the case. However, Nokia has also surely given Finland the skilled and adaptable workforce that can develop new products and continue to deliver wealth to that country.
No mining or polluted Canterbury and Manawatu waterways required!
From personal experience, some of the biggest hurdles to developing products are funding required to get that great idea and prototype product through the various international compliance requirements, marketing, and upscaling to an international market. Even products aimed at niche markets require investment to get them out of the back shed and into a position of generating wealth and jobs in the community.
This kiwi desire to want to make a success of making and selling cool stuff overseas has to be rich vein for “new” Labour to tap into.
The only “manufacturing” industry supported by banks and government in recent years appears to have been residential property construction devoted to building environmentally unsustainable Mac-mansions on the fringes of our big cities. This looks set to continue with sprawl from Albany to Wellsford around the so-called holiday highway as the solution to unemployment and keeping Nat party voting self employed tradesmen happy.
A dairy farming and resource extraction solution is the one other vision being promoted as the path to prosperity at present. Can Labour (and the Union movement) provide an alternative growth path toward a better future? Can New Zealand “make it” as a clever country? Real value adding jobs for many New Zealanders. A Finland of the south seas?
@ tuktuk, another nice one. Nokia started out by milling logs and making rubber gumboots. Does anyone here think that they would be the company that they are today if they had kept that as their core business or even tried to value-add on top of just logs and gumboots.
Joshua said: Loota – I agree with your first comment, but the “dynamics of the global economy” that you mention means that jobs go where the greatest efficiencies are to be gained. The opening up of world trade has opening up sector of the NZ economy to international expansion, while others have suffered because another country has the better “relative levels of technology, skills, capabilities and stable investment capital.”
However, i disagree that charity starts at home. For me, charity – or if you have read my posts you would know that the appropriate focus should be on empowerment – flows (it does not begin not does it end) to where it is needed. /
a) Your first paragraph describes a typical situation. You have not described what NZ should do to leverage and gain advantage from the physics of the situation you describe – so I will: fully deregulate only those domestic industries that are ready and mature enough to compete on a global scale. Other promising industries – must be supported and pushed towards that stage, and when they are ready, deregulation should occur. After extended periods of encouragement and support, no-hoper industries should be cut adrift and let to drown. Here’s the key: on no account should a promising and growing local industry but not quite yet ready to compete on a global scale be subject to the fire of a fully free market where the only outcome is that mature foreign competitors will rout and destroy it
b) I understand the whole Taoist principle of allowing flows to occur naturally and in an unimpeded way. But the taoist concept also accepts that flows – of empowerment in this case – can be intelligently concentrated and directed. Here’s the thing to realise: if you don’t do it, other parties will, and they aren’t going to direct the flow in your direction.
Re: Charity begins at home. I really wonder why would you allow calls to be made which disadvantge all your neighbours and while advantaging shareholders in far away countries that you have never met? Is it through some theoretical or conceptual sense of the neocon free market ideal? An ideal with the large corporation and its shareholders at the centre of it, not a country or its citizens?
c) As for your comment re: multinationals. They will rarely leave more money on the table for a given country that they operate in than they feel is absolutely necessary to continue there. Yes I agree, for some firms there may be a bit more left on the table than others. However the objective remains the same: to maximise EPS for their shareholders (i.e. not to maximise the wealth and tax take of the country that they are operating in and the citizens thereof).
@ Loota – I agree with you that fledgling industries should be supported and encouraged to grow – I am not a neocon liberal as you assume. If there is potential for an industry to flourish in NZ then we should support its development – indeed it appears we do this already to some extent, as we have done with the film industry for example. The examples that Clare raises in the original post, however, do not really meet this criteria. Telecommunications and IT are well established in NZ, the growth of 2 degrees and many IT firms proves this. The key difficulty I see is defining those industries that need protection and those that can be deregulated – that is something that people can argue about until the cows come home.
As to you question regarding charity – no, I do not consider the shareholders overseas, I consider the millions of people dying overseas. I look around NZ, even poor areas of NZ where I work, and I see a lot of excess and a lot of wastage. And then I look overseas, and confronted by the fact that millions of people do not even have access to clean water, or enough food to survive. I am talking about private charity here – and I think we may be talking about two different things. I buy NZ products, I buy foreign products – for me the decision is based on factors of price, convenience, and social responsibility.
It is a global market reality that office jobs are now being exported across broadband networks. Not just call centres and IT jobs but also accounting work.
We have to increase local saving (transfer money away from housing) and support R and D with tax incentives and fund CRI’s and universities to provide support for niche export development.
And create jobs with innovative policy.
One example.
Apply an alcohol tax only on sales at off-licenses – this will encourage more drinking at licensed outlets (create jobs). Ensure this creates further jobs at these outlets by adding regulatory burdens that require extra staff.
Say a criminal offence of public drunkenness defined by a blood alcohol level – have all licensed outlets breath test people at the door (provide them with a colour coded pass to buy alcohol for a period of time before a new test is required – pass for buying more alcohol at the bar.
Agreed, except for … alcohol testing all night. I think this is a violation of our rights.
It’s unpleasant and would feel like people were drinking in a police state. I think a better policy would be, cheaper drinks and a code of conduct. Bar staff are trained to recognised intoxicated patrons anyway, so that should be sufficient. And if people misbehave – say start brawling – then they should be thrown out by bouncers.
Agreed that bars are good places to drink, most supply free water.
I don’t think it was a criminal offence the times I accidently got borderline legless.
SPC said:
There’s actually no reason why NZ couldn’t become competitive and get some of this international work in, niche areas.
Although I agree with many of your points, the creation of pointless paper pushing public money sucking jobs via more “innovative” regulatory burdens is something I have to disagree with. One day some smart ass is going to suggest we get rid of all traffic lights and replace them with someone standing in the middle of intersections directing traffic flows. More jobs you see.
Focussing on the creation of productive, value adding, advanced industry and advanced services jobs which can bring hard foreign currency into the country, via smart Govt policy and incentives, now thats the way to go. Smart jobs which encourage NZ’ers to skill up and train up to earn more and do interesting stuff. Yes please.
@tuktuk
I think you have hit the nail on the head as far as Labour’s last term went, it seemed to be an administration where short term expediency ruled, giving tacit encouragement or complicity to two sources of unsustainable economic growth:
1. The construction sector in which prices have risen massively enough to make paying the mortgage a real struggle for lots of battling Kiwi families out there.
2. The dairy boom which has been allowed to proceed unchecked, while the failure of regional councils to contain it was largely ignored despite widespread evidence of environmental damage.
The second one is easiest enough, impose national environmental standards and enforcement. Not so sure about the first. However in essence these examples are probably what drives calls for Labour to return to its roots, which I am sure is a familiar refrain for the Opposition at present.
Promote the withdrawal of capital from the housing market gradually but significantly, and promote the capitalisation of advanced industry and services
Swampy said:
I take it you include the housing market in general within your statement.
The economic damage of having this country’s best and most motivated minds focus on gaming the housing market instead of creating productive advanced enterprise, as well as the pouring of capital into unaffordable non-earning housing instead of into productive plant and machinery, is significant.
And of course, the problems you already noted.
Loota, regulation of licensed outlets is a way to reduce alcohol related harm arising from the way we drink is not an added cost – but a way to reduce the cost of alcohol misuse and create jobs while doing so.
Unfortunately, we cannot compete with equally skilled people overseas (especially not Indians with an English langauge background) and thus will lose office jobs. We cannot match their lower wages (related to their lower living costs or else they would migrate here to do the work).
The best we can do is support such things as accounting software and other software development with R and D tax incentives and improve access to capital and affordable bank lending.
Swampy I agree about national environment standards for dairying.
We are going to find increased competitition from overseas – at a lower cost to our own will reduce profitability in the future and land values – and we get the environment degradation across a generation.
SPC said
Unfortunately, we cannot compete with equally skilled people overseas (especially not Indians with an English langauge background) and thus will lose office jobs. We cannot match their lower wages (related to their lower living costs or else they would migrate here to do the work).
In general I agree with many of the points in your post, however with the above we should think about the following – Australian wages are 25-50% higher than NZ for those working in the same profession. Why then has Australia not been losing office and white collar jobs to NZ, but exactly the other way around?
This phenomenon demonstrates that pay rates are only one of the many factors involved in the flow of jobs.
We only need to be afraid of increased competition if we do not take active steps to create competitive advanced industries and services ourselves – hence 100% behind your comments on R&D etc.
Possiblly because while we are 25% or more cheaper than Oz, others only have 1/3rd the wage rate we have. So if you focused on wages you would go for the lowest and we are not the lowest.
Don’t worry SPC not all hope is lost
The other question then is why NZ jobs are going to a country with wage rates 25-50% higher than here? I can understand your rationale that there are even cheaper waged places than NZ for international work to go. But going to a more expensive country? Yes it messes with the mind, doesn’t it? Perhaps the simplistic line of the Right isn’t actually true: wage levels are NOT the single major determinant of a country’s competitiveness in the global market place.
Loota said…
The other question then is why NZ jobs are going to a country with wage rates 25-50% higher than here?
Are you still confused about property rights? The jobs are not yours nor belong to New Zealanders. They are not taxpayers either. It is a private company. Get your head around that fact. Telecom is not your mom/dad’s (Mr/Mrs Loota’s) company. They (Telecom) run their business according their interests and not according to the wishes of socialist like you who sits from the sideline criticizing them. You don’t want to take risks and start a business yourself to employ people, you think that they have rights to what is yours (i.e., your business).
Get out there mate and set up a business and see if you can handle the risks that come with it. Stop being a loudmouth here in trying to tell other (business) owners of how to run of what is theirs. Start one yourself. Oh, and let us know when you become competitive out there in the market.
@ FF some marvellous assumptions and mishits there, but I am very pleased that you are staying true to form and cheering for the international corporations (but strangely not your very own Christian neighbours and the Christian citizens of the country you live in).
Now I can accept that a company will run its business according to its own interests and the interests of its shareholders. But its now past time for you to accept that a country is more than capable of operating according to its citizens’ interests and altering the business environment to do exactly that. Gasp! Exactly what countries like Singapore, Taiwan, China, Hong Kong, Malaysia, Finland, Sweden and others have done.
By the way, I happen to know a few things about competing against better funded, much more established and highly capitalised industry players, these days I’m far more interested in how to compete against better funded, more established and highly capitalised countries
Patience, my comment will arrive out of moderation purgatory sometime
Loota, as to why office jobs are going to Oz, those jobs are not office support jobs but Head Office Administration jobs and those go because of the centralisation that occurs with a global market economy.
Hi SPC – well, I think that we can pin that “centralisation” down to countries (and shareholders) who have access to reserves of capital able to raid (ahem, I mean acquire) profitable assets in other countries; countries which do not have access to that same level of capital and allow that activity.
Now there was nothing stopping NZ from buying up Oz banks was there, and centralising Head Office operations in Wgn or AKL?
@Loota May 1 12:14
Never mind, I thought better of it overnight.
The problem is the construction sector and dairy farming are the only growth sectors in our economy, fact of life. The government will have to find some way of mitigating the imbalance but it can never seriously contemplate shutting down those sectors.
Hi Swampy, I agree, we can’t shut those sectors down. Tourism as well. Any industry which we have real advantages and skills in, and can generate hard foreign currency needs to be supported. Just worth bearing in mind that these sectors didn’t come from no where, deliberate Govt action was taken over decades to help support these industries to become and mature into the money spinners that they are now.