Australian firms lose customers to skilled role gaps

ConnectOS has published research showing Australian businesses are losing customers and turning away work because they cannot fill skilled roles. The findings also point to growing use of offshore hiring among surveyed employers.

Among respondents, 33% said hiring difficulties had reduced service quality, while 32% reported losing customers. Another 31% missed project deadlines, 27% lost or delayed contracts, and 26% declined new business because they could not secure the talent required.

The figures are based on a survey of 214 organisations using or considering offshore arrangements. Almost all were headquartered in Australia.

ConnectOS Founder and Chief Executive Officer Steve Evans said the problem had moved beyond recruitment. "Talent shortages have become a boardroom issue with measurable impacts on revenue, productivity, customer experience and long-term growth."

The research suggests employers are increasingly looking offshore as labour shortages and wage pressure persist. About 62% of surveyed employers already had offshore arrangements in place, while 38% were considering them.

Many employers said they had struggled for weeks to fill local vacancies before shifting work offshore. The report found 60% took between 30 and 60 days to fill critical onshore roles before turning to offshore staffing.

Skill shortages and wage inflation were the most commonly cited reasons for going offshore, each named by about 39% of respondents. Compliance costs and risk followed at 37%, while 34% pointed to the time needed to fill critical roles.

Evans said employers were using offshore teams to address shortages rather than cut domestic jobs. "This isn't about replacing Australian workers. It's about Australian businesses struggling to access enough of the skills they need. Organisations are increasingly building integrated onshore and offshore teams to fill capability gaps, support local employees and create the capacity required to continue growing."

Surveyed investment plans suggest the shift will continue. Sixteen per cent of respondents expected to increase offshore investment significantly over the next 24 months, while 50% anticipated a slight increase. Another 31% expected no change and 3% planned to reduce spending.

Changing roles

The research also indicates a shift in the type of work being sent offshore. Customer support remains the most common function, but employers are also building offshore teams in IT and engineering, data and analytics, finance and accounting, cybersecurity and compliance, marketing and digital, and HR and recruitment.

More than a third of employers said offshore roles had become more specialised over the past three years. A further 21% said the work had become more strategic or knowledge-based.

South-East Asia was the region most often identified as the main area for offshore growth, cited by 56% of respondents. The Philippines was the most common current destination at 36%, followed by India at 26% and Eastern Europe at 24%.

Evans said the mix of roles was broadening. "We're seeing a significant evolution in the types of roles organisations are choosing to offshore. Functions such as legal and compliance, HR and marketing, once considered difficult to offshore, are increasingly being integrated into global teams as businesses gain confidence in the quality of talent available, advances in technology and more mature collaboration models."

AI adoption

The report found that two-thirds of employers were already using AI tools. Among respondents, 79% said offshore teams were adopting AI at the same pace as, or faster than, onshore employees.

Data Analyst was the role most often identified as growing in response to AI use, selected by 47% of employers. AI Engineer followed at 35%, with Automation Specialist at 32%.

Evans said AI was changing the work mix rather than removing the need for people. "AI is changing the nature of offshore work, not removing the need for offshore capability. Routine and rules-based activities will increasingly be automated, but organisations still need people who can interpret information, exercise judgement, understand customers and apply AI within a specific commercial context."

Retention and compliance

A separate employee survey of 495 respondents across offshore, hybrid and onshore teams found relatively strong retention indicators among workers in offshore arrangements. It found 84% felt proud to work for their organisation, 86% expected to remain with their employer for at least the next 12 months, and nearly 73% expected to stay for at least three years.

About three-quarters had already been with their current employer for more than one year, half for more than two years, and 69% said they rarely thought about looking for another job. The study also found 93% agreed that happy employees delivered better customer outcomes, while 84% said high morale led to stronger team performance.

On compliance, the survey pointed to a confidence gap. While 79% of employers said offshore compliance expectations were higher than three years ago, only 25% felt very confident in their current compliance position. About 29% said they were unsure which standards applied to their offshore operations.

Evans linked retention to business continuity as offshore roles become more specialised. "A stable workforce preserves organisational knowledge, reduces repeated recruitment and training costs and gives employees time to build deeper expertise. That continuity becomes even more valuable as roles become more specialised and organisations introduce AI and automation."

The survey also asked employers what would define strong offshore partners in the coming years. AI enablement ranked first at almost 50%, followed by talent development at 48% and cultural alignment at 43%. Cost leadership ranked fourth at 33%.

"When Australian organisations cannot fill critical positions, the consequences extend well beyond recruitment. They affect customers, project delivery, existing employees and ultimately revenue. Australian businesses are losing work, delaying contracts and stretching their current teams because they cannot access the skills they need in the required timeframe."