Paul Magiatis – Barely Scratching the Surface of the Future of Outsourcing

Derek: Hi and welcome to another episode of the Outsource Accelerator podcast my name is Derek Gallimore and this is episode number 116.  Today I’m joined for the 3rd time by Paul Magiatis, he is a serial entrepreneur and businessman we actually spoke previously to Paul in episodes 105 and 110.  If you want to get his back story and of course an introduction into his East West Enterprises which is an outsourcing back office firm that he setup from to scratch his own it itch as they say and service companies and then he extended those services to other entrepreneurs so an interesting story in this episode we talk more broadly about the future of outsourcing and then actually we go down the rabbit hole of exploring the future of work and the place of people in work and where they will at some stage be made redundant so quite an interesting chat I certainly enjoyed it and I hope you will too if you want any of the show notes or to get in touch with Paul then go to outsourceaccelerator.com/116 and enjoy.

Derek: Welcome back everybody, today we have Paul Magiatis again with, hi Paul.

Paul: Derek, how you going?

Derek: Good, great great and I will obviously allow Paul to introduce himself but we’ve had him in 2 previous episodes where he discussed his outsourcing journey and also his outsourcing service provision, Paul himself is a successful entrepreneur with multiple businesses sitting mainly in Australia but i believe you travel around lot so i just want to tap in to Paul’s business insight and with a obviously outsourcing perspective there.

Derek:  So I’m doing a certain amount of lobbying with Outsource Accelerator that the focus for the Philippines needs to be on the SMEs.  There’s a little bit of a hangover from earlier days of outsourcing where they’re all focusing on the multinationals who would take 10,000 seats and of course that place into the benefits for the bigger outsourcing providers but that is now stagnated and I think the outsourcing associations here they’re thinking that it’s really all a bit over and it’s you know the sun is setting on the industry but really there is a huge growth in the sme market I’m certainly seeing it and I’m sure you are too is 35 million

SMEs and the high-cost english speaking world and still many of them do not or are not aware of outsourcing and as you say it’s becoming more and more accessible to these SMEs because of cheaper infrastructure because there are more BPO service providers that are focusing on SMEs and there’s an inevitability as the world becomes smaller with technology that we’ll just be natural to you know if you’ve got a 5 person business that they’re gonna probably be spread across the world there’s a sort of fast changing dynamic in every aspect to business isn’t it?

Paul:  35 Million SMEs that there’s a lot of work there in those SMEs.  Most SMEs are broke and fold in a 5 year period mainly because of cost or they just can’t afford to keep going cost or capital cost now you had outsourced to that you’re gonna increase that number.

Derek:  And it’s ironic isn’t it because the SMEs as you say they need the support from the governments or the systems because they are the seedlings of growth and you know but ironically it’s only the big conglomerates that have access to most of the benefits of a big business which is taxation, avoidance, outsourcing kind of advance financial structures and typically the SME, they’re dealing in far more competitive difficult space but they don’t have access to a lot of these resources yet so they need to take advantage of everything they can and they need to get to get into outsourcing they need training structure their taxer and so there’s certainly an opportunity and do you see then a how is it going to pay out in 20 years are there going to be any trade to borders? is it going to be sort of geographical differentiation in business?

Paul:  There won’t, It’s already happening now where governments can’t contain what we do on the internet so for instance we outsource within our outsourcing business with our product offerings for SEO, for instance, we have articles getting written in Argentina and someone in Canada are writing blogs bring it in to a package into the Philippines and we do the reporting and the grunt work behind that so I’m pretty sure that the people and I don’t even know who these people are on all organization people we employ to do jobs in Argentina and Canada is part of the SEO teams that’s from the IT department we’re already doing it so in time each country will have a skill set that we need and we’ll spread it to those countries as well you know in different form so contracting for now but in time we may take an office there as well it make sense our office is in Hong Kong which make sense we’re a global company so we need to send the in the global office that we have our offices in Hong Kong cause no one where Perth Australia is and that’s the reason we’re there people that we deal with in the UK don’t have a clue where Perth is so you can have your presents in 1 country you’re staff in another you manage it and another right another.

Derek: A long time ago it was only 15 years ago, if that 20 years maybe that for you to import or export anything and the governments put severe restrictions on these you either had to send a person somewhere and that’s workforce migration or you sent a product somewhere so that’s the kind of manufacturing outsourcing but now the economies moving completely or the majority of output in most economies is services and professional services and information services and none of that can actually be effectively policed or have any kind of any border control because as you say I mean your SMEs is spread across every corner of the globe and I think there’s still many many the majority of SMEs now like your opinion on this that are still completely unaware of outsourcing or the potential of outsourcing would you agree?

Paul: I absolutely we live in a virtual world that is growing every day and went to a meeting this morning with 12 business people and had a chat to them about outsourcing most people are aware of it now maybe a third have tipped their toe and trying it out but the rest have no clues so when we did some example that would just godsmack that you could take a task they’re doing here send it through to India to get the code written and then put it together in the Philippines and have it back in 48 hours it’s and the cost compared to what the priced here had 70% less they just godsmack it the possibility and look 20 years from today the world is a different place the jobs that we have now they won’t exist there be fewer jobs we may not all have jobs but we’ll have to have an allowance and perhaps the government would just give us an allowance to live on because really ball already released a flying car that’s already happened our pizzas are getting delivers in New Zealand with a drones currently through Domino’s they’re doing a test over there landing the drones with the pizza on so the world is changing quickly the jobs are changing, quickly technology is taking out whole industries.  Uber has taken out the taxi industry which is a regularly added industry but all of a sudden bang there’s uber everywhere and that’s created different jobs and opportunities.

Derek: And it’s happening like never before really isn’t it because jobs have always evolved and there were ladderized that protest at about the mechanized fabric looms then, of course, there are the horse and cart and people move but actually the evolution that we’re seeing now with robotics with AI with sort of IP services changing all over the world actually we are fundamentally losing the low end of jobs aren’t we because we will have low-cost robots or low-cost computer executing a lot of jobs so as you say there’s talk of living allowances because fundamentally in the future they’re probably won’t be enough for humans to do to necessitate earning a salary from you know.

Paul: Absolutely and you can see the trend in the largest cities now where the driverless cars we’ve got a driverless bus in their doorstep which is hilarious, so in time if go driverless which I suppose will be a great outcome for uber that’s their endgame I would imagine but driverless cars then who pays for the infrastructure, who pays for the roads, go we go a step further we got our first flying car which is you can buy for 70 grand of currently then you don’t need your roads so then where all those jobs go, what happens there all that land.  It’s quite mind boggling to sort of think forward 20 years the world will be a different place with different jobs most of our jobs won’t exist, all people now tell me about the typing pools that used to have or that doesn’t exist because we can now just use siri and create a 4 or 5 page document by talking to our computer and then we’ll work and the economics I think somewhere in Columbia for instance they worked out that it was actually cheaper to use manual labor to move rocks than it was to bother machine cause the machines cost half a million dollars so now they use people, so if you want a job lifting rocks to move to Columbia for instance so it’s going to be all economics but in time it’s all going to be leveled out the market will always level itself out so what things cost in this country what things cost in the Philippines, for instance, they’ll come up a little bit we’ll go down a little bit in time it’ll be a market price the market will determine what their price is now with the information transfer being so quick you can very quickly figure out how that equalizing is going because you are seeing in places where people just don’t do those and well they don’t exist you have to offshore it cause no one wants to do it.

Derek: I think it was Adam Smith one of the rather first economist that predicted forward that the world is becoming increasingly more efficient and it shouldn’t be too long before people don’t need to work in order to sustain their lifestyle but you know we’re kind of 300 years beyond Adam Smith and we’re still you know people are working 60 70 hours and then so whether it is actually just a human condition that people want to work a hell of a lot because they then feel fulfilled but actually the reality is that this is futurism might actually become through because you know if everything is done for us then we would only have then sports and hobbies really wouldn’t we.

Paul: Yeah and look a friend of mine, the he’s the director of information technology in Australian University – IT technology so we’ve had this discussion where they want the jobs you will all get an allowance in time when are going to do what you do filling in your day have some structure in your day cause of the human brain doesn’t work well does anything you need to be doing something you need to be structured but it won’t work as such that’ll be an allowance and the large corporate we’re paying for the infrastructure who was etc. it’ll be a virtual world as not that far away before his mate fly to Mars and start something all that stuff is going to happen.  My 12 years old we’re blessed enough to send her to a private school in Australia and she came home 1 day and she said Dad we watch this cartoon called the jetsons we’ve seen the jetsons and they’re watching the jetsons cause it was hilarious and the teacher are said at the end which part of the movie or part of that cartoon was a little bit odd to you and all the kids said ah they’re using real money in this that was the only thing that was odd so the talking computer was normal and this was like mid 60’s they did the jetsons, the mobile phone, the flying car all the stuff that they were looking at already exist you can google it and you find it now most of its part of everyday life the only thing that they didn’t foresee back then in the jetson of all things was all things using cash and they use card for most things and for a 12-year-old to pick that up pretty interesting everything else they thought was normal except for the money part of the future and that’s interesting because money is going to be global figure in time as well and that started that revolutions…

Derek: Yeah with the chain and the cryptocurrencies it’s all going to be and decentralization I mean all the banks are going up and like all of these kinds of centralized authorities are going to be gone sooner aren’t they?

Paul: So in time it’ll be a different place better place cause you got to progress got to evolve that’s like that’s the way it is you don’t evolve and progress with that and you kind die a natural death and you’ll be lonely.

Derek: So let’s just move this back to outsource and this interesting because you know I push out a lot into the eater and promote outsourcing and Outsource Accelerator, we do get a little bit of kickback from people that are worried about the future training so they’re worried that they’re going to lose jobs.  I have real belief that outsourcing is a win-win but you know there are people that try and lock the borders and try protectionist measures and 1 thing to stay the same but inevitably there isn’t inevitability about evolution isn’t there you know and generally i think history shows that evolution is generally a positive thing lifestyles have improved generally over history so do you see as an inevitability and can we really guide or steer where this is going?

Paul: We do we we already got this if you go back to Henry Ford if Henry asked people what they wanted they would have wanted a faster horse so he gave them a car people don’t really know what they want it’s entrepreneurs come up with ideas that make people’s life easier and better and then people that are on to it then they become the norm.  I think your outsourcing especially that’s accessible toy your SMEs you become the norm, because as value as expenses get higher in some countries and becomes unprofitable to do the jobs you’ve always done and if that’s all you know and that feeds your family you have to find a solution and if that solution sitting there and that’s a more normal thing to do it will get bigger and bigger and bigger and then people believe the normal then some is gonna come in 1 day and say all these robots are much better but it’s gonna take them decade to convince everyone to go down that route so I think we got maybe 10 years left in our outsourcing before we can look up maybe robotics or even could be longer .

Derek: That is a real concern the Philippines so isn’t it that you know a lot of the bulk outsourcing jobs could be lost to AI and computers.

Paul: How far do you think that is a way to really cause it takes people a long time to latch on to when you are even if its a good one.

Derek: Yeah I mean you have these options on the beginning of phone calls when you call the bank and that been developing those for 30 years and there’s still useless aren’t they are they still sort of infinitely frustrating.   I think it still a very very long way until AI is a broadly intelligent function you know I think they very kind of narrow intelligence at the moment and a computer can add up number faster than a human, broad intelligence and broad applicability of that intelligence.

Paul: and until it becomes normal and our billionaires bring it to the 4 front promote it and turn it to something that’s cost effective than works it won’t you could be 30 years away so I don’t think there’s an issue just yet but they will be things will change again or outsourcing will be the flavor of the month decade or 2 decades and then 1 day someone will develop something that will work better.

Derek: And again I think it’s sort of full circle track conversation actually because it is actually the big employers and the big outsource you know like the western union of the world who have kinda 20 thousand people sitting in Manila, that they are here are pressuring the BPOs that are supporting those workers to come up with computer algorithms and systems and ai that will actually drop their number so i’ve like you hear kind of reports that accenture’s been told to drop the seat numbers by 5 thousand because there’s an expectation that more and more of this roles should be kind of automated through basic early stage algorithms and so it’s almost you know the again the big boys get the leg out first because they can drive these innovations and it’s effectively the high end of town BPOs that are now being pressured to find those solutions so it’s it will be an interesting.

Paul: And in time that will come available to your SMEs and I spoke to a business coach just the other day to have the same conversation and he put a very crudely friendly said your job Paul is cheap bums on seats.  I think that’s an accurate description he said my job Paul is to get less cheap bums on seats and that’s exactly how he put it back then so he was like cost savings and staffing and then efficiency and then reduced the number of team members and as cruise it sounded at the time is actually quite right he’s a high-level business coach doesn’t makes his words and he does that with people so he will refer someone to me and we’ll staff them up and his goal over the next 3 to 5 years will be to okay now that we’ve got this thing working and we’re making money and we can afford to make mistakes cause our cost bases are so low now we have to get efficient now we have to automate now we have to get the algorithms to sort of get most of these done before it gets to the point where it needs to go to the admin staff so that’s the way it’s going to go but I think that’s a long way off for us and again that’s our children will have to worry about that then again they’ll have the same problems, we’ve got to see opportunities and latch on to them.

Derek: I mean it’s all the sort of it’s the march of efficiency progression isn’t it? Its just always going to a point of less friction and you know more efficiency really that’s fascinating.

Paul: It is but the outsourcing industry for the SMEs is still new, we haven’t scratched the surface yet really so the SMEs haven’t grasp as you said 35 million SMEs and look alot of them wanting file will go broke if we can change that number to 2 and 5 there’s a lot of work there so I think we’re ok for a good 20 years before we have to really think about any major changes but like anything you’ve just got to keep your eye on the ball, stay focused and improve lots of times embrace new opportunities and just incorporate them into your team cause no matter which way you look at it even if you get new technology you will always need at this point outsource to run it.  You have to have someone sitting there for when there’s a glitch, you always have someone there to make that software talk to the other software so there will always be something in the background, in fact, their jobs you’ll be getting less of them but we’re creating different jobs so just go to see which jobs are coming in the future and where the economy is going and where technology is going and find that niche and crawl in to that niche and you will always have a job and this is what we look some of these things at the moment where our clients really need the technology but they just don’t know how to drive it so we’re going to find it and place someone who knows how to drive it and then we employ them to help out the client.

Derek: Well that’s an amazing insight and I didn’t expect to talk futurology with you but it’s incredible topic but thank you so much for joining us Paul and if people want to get in touch with you how can they do that?

Paul: If they go to the website eastwestenterprises.com.au have its phone number on there top right hand corner otherwise just on the context page flick us an email if you put my name on the subject like I’ll end up with that email and I’m happy to talk to anyone that’s interested in getting a conversation started about outsourcing.

Derek: Fantastic and of course all of those contact detail will be in the show notes.  Thanks for your time, Paul.

Paul:  Thank you so much.

Derek: That was Paul Magiatis, so if you want to get in touch with Paul or want to know anything about the show or take any of the notes then go to outsourceaccelerator.com/116 and of course if you want to ask us anything then drop us an email at [email protected].  See you next time.