Australia’s national carrier Qantas, recently announced outsourcing of some functions resulting in the loss of 850 jobs locally.
What has been learnt over the last three decades of the benefits or otherwise of outsourcing?
For example, in 2009, two of Australia's biggest trade unions commenced outsourcing one of their core business activities – member recruitment – to the private sector. The firm, Work Partners employing 90 recruiters, was paid $500 per new union member recruited. As a headline in The Australian newspaper put it at the time, "Unions employ ultimate in outsourcing".
Brian Henderson, Secretary of the Victorian branch of the Australian Education Union (AEU), said that "the company (Work Partners) had brought in 7,000 new members from schools, TAFE colleges and early childhood centres over the past two years."
As one would expect, there was much opposition within union ranks to this scheme. Australian Workers Union national secretary, Paul Howes, said at the time that he was opposed to the use of Work Partners. "We don't use them. We are not going to use them as we don't think you can outsource core union work," he said.
Other officials said the recruitment strategy was a "bad look" and a questionable way of addressing declining union membership.
Shift now to May 24, 2011.
The phrase "ultimate in outsourcing" in the 2009 headline was apparently not "the" ultimate. You might think that the dissent among union ranks led to the review of the union's relationship with Work Partners. You'd be wrong.
In fact, Work Partners attempted to outsource its own jobs overseas and devised plans to set up a call centre in The Philippines!
Whilst the AEU example may be local outsourcing, it brings into focus the whole notion of outsourcing, and particularly offshoring.
What are the benefits to businesses? What are the downsides? In particular, what are the implications for managers who now perhaps have to manage an additional stakeholder – the overseas workforce?
Are benefits such as new members (or customers), cost cutting, or financial gain, worth the angst that often comes with outsourcing?
Ah, where have you gone Qantas?
Outsourcing and offshoring have been around for 20+ years. The ongoing debate rages around cost/benefit versus local job loss/retainment. And these are valid issues. They can be particularly relevant to the long-term success of the business from both a financial and organisational culture perspective.
The nature of which jobs can be outsourced is also often raised in such debates. For example, many organisations have successfully outsourced some of their back-office jobs. Back-office IT outsourcing is quite common. Other functions are also being outsourced. In Australia for example, most local bank branches previously processed all legal (mortgage) documentation at the local branch. That process was then centralised to a HO department. These functions have now been totally outsourced, most notably to firms in India.
But in the headlong rush to outsource everything and reduce overheads, many firms have lost the plot. Now they are outsourcing the sharp end of their business – their customer interface.
Many people reading this article will have stories to tell about their experience with an offshore call centre. Mine came a few years ago.
After more than twenty years with my phone provider, I was threatened with disconnection because I was "approaching my credit limit". The reason? I'd been travelling overseas and global roaming can be expensive. My bills are always paid on time. My current bill was not yet due (in fact I'd not received it). However, the message read “if I did not make a payment immediately, my connection would be cut.”
I made a payment.
I also called the service hot line. Where was this located? Yes, you guessed it, offshore! To cut a long story short, I became angrier and angrier as the call progressed. The operator had no idea about my long-term relationship with the company. Her "canned" responses to my questions did not satisfy my requests nor appease me.
I immediately looked for another provider. The first question I asked was, "Where is your call centre located?" With "offshore" responses at the first two, I moved on and hit pay-dirt at the third. Not only were they local, but the service I received was far superior to the first two.
As a keen student of management, I decided to find out a little more about the management of this provider. Was there perhaps something driving this emphasis on service in this organisation?"
To my surprise and delight, I found that David Thodey, CEO of Telstra at the time (my new provider) and his entire senior team had recently spent a day on the phones themselves answering customer service enquiries. The old leadership adage of "Do as I do" was obviously in play here.
Yes, these senior managers needed some training, education and coaching (each had a buddy sitting with him/her whilst on the phone). And yes, as you might expect, they were quite nervous. However, the benefits far outweighed their slight discomfort.
As Thodey said after his experience on the phones, "My respect for the consultants and the way they interact with customers, has always been high. Now it's even higher. . . listening to customers, really understanding what they need, confirming what they say, finding all the information. . . it was great."
David Thodey became Telstra's Chief Executive Officer on 19 May 2009, announcing a strategy of market differentiation and a renewed focus on customer service and satisfaction. By the time I signed on to Telstra, he'd obviously been true to his word.
One interesting result is the Telstra share price. Previously the share price had never reached the original float price set 10 years ago. It had been a poor performer. However, since the new CEO came on board, the price steadily increased and was at last approaching its original float price.
Is there a message here for managers and their organisations?
Shift now to November 10, 2026.
It would seem that Australia’s national carrier, Qantas, has not heard that, “Organisations cannot successfully outsource the sharp-end of their business, whatever that sharp-end may be. It has to be done in-house”. How else do you know what your customers want and need? And it's only when managers experience the sharp-end interface (as Telstra did) that they understand the challenges facing their people.
Qantas CEO Vanessa Hudson is reported to have said. "This is hard news for some and I'm sorry for the uncertainty it brings". She said the changes, “Are about modernising the technology behind our business and becoming more efficient, so we can keep investing in our customers, our people and our future”.
With Qantas slashing 850 jobs locally, is outsourcing really, “Investing in our customers, our people and our future”?
There may well be a place for outsourcing certain aspects of the business. However, making that decision requires considerable thought. Will it help achieve the long-term goals of the business? Will it support and enhance the corporate culture? How will all the stakeholders (including the community) view the decision? And importantly, how will Australian customers feel when they have to make their travel enquiry through an Indian call centre?
In regard to the community stakeholder, there’s recently been a lot of banter from Australians about how Qantas was bailed out by the government during Covid. Between March 2020 and June 2022, Qantas accessed over $2.35 billion in government assistance programs and was not asked to pay any back. Nor did the government take equity in Qantas as part of this deal - unlike Singapore, Germany and Finland who took equity stakes in exchange for support – the Australian community got nothing!
And so, as the Australian unions discovered, a decision to outsource based purely on cost/benefit analysis, in the longer term proves costly in more ways than one.
Ah, where have you gone Qantas and what will you discover? And at what cost?
The genesis of this article comes from “What To Do When Leadership Is Needed: A workbook for managers who aspire to become leaders”, Bob Selden, 2025. It highlights the vexation of treating outsourcing as a strategic lever for organizational development.