457 visas (that is Temporary Work (Skilled) visas) have been
getting a lot of press of late, largely due to the downturn in the job market
and the upcoming federal election.
457s aren’t though well understood, so I thought I’d shed
some light as to how and where they are being used, and how they are impacting
on the local IT market.
It’s not just a simple case of Johnny Foreigner, the Java
Developer, arriving in Australia, applying for a bunch of Java roles on SEEK,
pricing himself sharply, and an employer hires him over the local options and
sticks him on a 457. In fact it’s far more complex.
In the scenario above, the employer would be highly unlikely
to be able to sponsor Johnny’s 457s visa (few companies are approved to do so).
And even if they could, there is no guarantee than Johnny would be offered a
visa. In fact, he almost certainly wouldn’t.
So how does all this 457 stuff work?
The companies that tend to be approved for 457s are
outsourcing firms. Not though companies like IBM & Fujitsu. Rather outsourcers
like Wipro, TATA, HCL– outsourcers with their roots overseas. These companies
are coming in a competing with IBM and Fujitsu and the like. And when they win
the pieces of business they largely use overseas resources. Hence they are very
cheap and win a lot of business.
Now offshoring isn’t new, nor
does it explain where 457s fit in. The connect is the business model these
companies like TATA, HCL and Wipro now don’t run a purely offshore model with
the entire team sitting offshore. Instead they bring a small though significant
percentage of their team to Australia (on 457s). This gives their people a good
insight into the culture of business they are working with, enables them to put
some faces to names of the local stakeholders, and also provides a handy
channel of communication should problems arise. Combined it makes the
offshoring/outsourcing model run far more efficiently.
And that’s the thing about the
new model off offshoring/outsourcing. It gives far better outcomes than going
down this path has yielded previously. The technology has also gotten better. It’s
no longer a massive headache.
The cost savings are massive. A developer of around 5 years
experience costs around $90000 per annum in wages in Australia (give or take). In
India – less than $10000 per annum. When companies are looking at a 10-15
person project team that becomes a massive gap. It makes it incredibly easy for
the offshore based outsourcer to outcompete local options.
The 457s are a key piece of the puzzle though. By bringing
some team members to Australia, it makes the projects run far more smoothly and
yields superior outcomes to where the team is100% overseas. Yes it is more expensive
for them than 100% offshore, but they have a lot of wiggle room on dollars.
So, yes, the 457s are denting the Aussie job market, albeit you
are unlikely to be in direct competition with the visa holder. These offshore
outsourcers are beating the local outsourcers to projects, and that in turn
means less jobs for Aussies. That role that would have been with IBM is now
with TCS, and they aren’t hiring someone locally.
So would a crackdown on 457s help the local IT job market?
In short, yes, provided the crackdown targets the right businesses.
I do though think local IT people need to be aware of this phenomenon,
and lift their game &output accordingly. IT departments don’t enjoy the best
of reputations in Australian business, and at a time when the local MD is being
pitched far cheaper IT options, you need to make sure your IT department is
delivering.
(note – even though I have used developers as my example
above, the same is equally true of infrastructure engineers)
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