For the last decade, Australian business owners found their answer to rising costs and talent shortages: go offshore.
Philippines, India, Vietnam. Pick your destination, set up your team, and watch your admin costs fall by 60 to 70 per cent. It worked. Currently, 48 per cent of Australian SMEs are either outsourcing work offshore or actively considering it, with more than 300 Australian organisations employing approximately 44,000 Filipino offshore workers.[1][2][3][4][5]
However, something is shifting, and it is happening more quickly than most people realise.
How We Got Here
Let us rewind. The offshore boom was not a fad; it was a survival strategy.
Australian labour costs kept climbing. The median hourly rate for SME employees reached $38.67 AUD in 2024, with wage growth at 3.4 per cent in March alone. Finding good admin staff became more difficult. For SMEs with between 10 and 200 employees, part of Australia's 2.6 million small businesses that make up 97.2 per cent of all companies, every headcount decision was critical. Your margins depended on it.[6][7][8]
Offshoring solved real problems:
For businesses overwhelmed with admin work such as NDIS providers, human services organisations, construction and heavy industry firms, it was a lifeline. You could finally afford to have someone handling compliance paperwork, client coordination, data entry, and all the low-impact tasks using up your day.
The trade-offs? Time zone juggling, quality control from 7,000 kilometres away, and communication friction. Sometimes there were security headaches, especially for companies dealing with sensitive client data. For highly regulated industries like NDIS, strict security requirements made offshoring especially challenging.[10][11][12][13]
But the sums added up. Australian companies could save 50 to 70 per cent on labour costs, with typical roles in the Philippines costing 20 to 30 per cent of their Australian equivalents. So thousands of Australian SMEs built teams across Southeast Asia and did not look back.[2][14][15][1]
The Cracks in the Model
Here’s what most business owners do not mention publicly: offshore teams require significant management oversight.[16][10]
Local managers are needed to quality-check work. Systems are necessary to catch mistakes before they reach clients. Patience is required when cultural differences cause misunderstandings. Above all, owner time is required to ensure the offshore team actually reduces the workload, rather than creating a different kind of admin burden.[17]
Communication delays and scheduling conflicts consistently cause problems. According to one outsourcing expert, “misaligned time zones can lead to communication delays and disrupt project timelines”.[11][10]
For industries like NDIS or sectors with strict security requirements, offshoring was always more complicated. You could not simply hand over client files with sensitive health information or proprietary operational data. The risks were high, and the compliance burdens significant.[12][13]
Even when it went well, you were still paying for human headcount. Lower cost, yes, but always limited by human capacity, human error, and human availability.
That was the ceiling.
Enter AI That Actually Does Things
This is not about ChatGPT rewriting your emails.
That was 2023. It was helpful, of course, but fundamentally just a tool to use manually.
What is emerging now is different. 85 per cent of Australian SMBs are now experimenting with AI, compared to a global average of 75 per cent. More importantly, AI systems capable of operating in semi-autonomous or even fully autonomous modes are being introduced.[18][19][20][21]
Semi-autonomous means the system handles a task from start to nearly finish, only flagging up for human review at key decision points. For example, processing client intake forms, extracting data, updating your CRM, and drafting follow-up communications—all without any manual intervention until final approval.[20]
Fully autonomous AI means a system runs end-to-end without human interaction. It receives a trigger (such as a new enquiry, a compliance deadline, or a data update), executes the workflow, and completes the task.[21][20]
This is not science fiction. 1.3 million Australian businesses, or 50 per cent of all companies, now use AI regularly, with adoption growing at 16 per cent year-on-year. These are not just large corporates; small businesses in Sydney, Brisbane, and Perth are deploying these solutions.[22][23]
Statistics show that while 58 per cent of businesses use AI for basic tasks such as chatbots, just 24 per cent have achieved transformative AI usage, where it is core to decision-making and business models.[23][22]
What Changes When AI Takes the Wheel
The maths changes completely.
With offshore teams, you were simply swapping expensive headcount for cheaper headcount. Yes, that reduced costs, but you were still paying per person, and each person had limited output.
With AI systems, you are no longer counting heads. You measure what is achieved per person.
Research shows that AI automation can result in two to four times the revenue per headcount compared to traditional staffing models. Australian companies implementing business process automation see 30 per cent productivity improvements, as well as 25 per cent reductions in manual errors.[24][25][26]
Eighty-eight per cent of Australian SMBs using AI report revenue increases, and 48 per cent see positive ROI within the first year. Productivity gains are significant: Nielsen Norman Group research reveals a 66 per cent productivity increase among workers using AI tools.[19][27][18][24]
The receptionist who once handled 50 client enquiries a day? With the right AI system, that person now oversees 200 or more inquiries, while focusing on complex cases needing a human touch.
Your operations manager exhausted by compliance paperwork? They now monitor automated workflows, spending more time on process improvement, and far less on data entry.
This is the fundamental shift: from cost reduction to multiplication of revenue per headcount.
What This Means for Your Business
For owners, this change unlocks three new opportunities:
You can finally exit the day-to-day operational grind. When low-value tasks are automated, you are free to think strategically, build relationships and focus on business growth, not just maintenance.
Onshore AI systems provide more control than any offshore team could. There are no time zone delays, no language barriers, and no risk of data leaving Australian servers unless you choose it to. For NDIS providers and other sectors handling sensitive information, this directly addresses longstanding security and compliance concerns.[13][12]
You can serve more clients, process more transactions, and handle increased volume without proportional headcount. Your team becomes far more capable, enabling growth in revenue per employee instead of simply cutting costs.
Businesses that embrace this transition early will provide improved service to their customers, respond more quickly, make fewer errors, and have more capacity to take on new work.
The Race Is On
Only 7 per cent of Australian executives aspire to lead in AI adoption, compared to 15 per cent globally. This means a huge first-mover advantage for those willing to act.[28]
The advantage belongs to those who move first and move smartly. Ninety-five per cent of businesses adopting AI report an average revenue increase of 34 per cent. Eighty-six per cent experience improved productivity, and 94 per cent anticipate average cost savings of 38 per cent.[22][23]
Yet, 76 per cent of Australian SMEs have not developed a clear AI strategy, even though 83 per cent expect AI to significantly impact their business within one year. Most are still "trapped in the shallow end" of AI use, relying on basic tools and missing the full transformative opportunity.[29]
The competitive field is shifting. AI leaders report 1.5 times higher revenue growth, 1.6 times greater shareholder returns, and 1.4 times higher returns on invested capital compared to late adopters.[30]
Some businesses will move too slowly, waiting for “proof” while competitors are already scaling.
Others may move too quickly, deploying half-baked systems that cause confusion and unsettle teams.
The winners will be those who move at pace but with care: testing, learning, refining, and scaling, while upskilling staff to work with, not against, these systems.
Where This Leaves You
There is no need to pick a side.
What matters is understanding what is happening. The offshoring playbook that worked over the last decade is being rewritten. With 43 per cent annual growth in offshore outsourcing meeting surging AI capabilities, the advantage will shift to those who adapt first.[31]
The technology already exists. Australian startups even outpace large enterprises: 81 per cent of startups use AI, compared to 61 per cent of big companies. The systems are ready. The only question is: how quickly will you move?[23][22]
The window of opportunity will not stay open forever. PwC suggests trustworthy AI could add between $45 billion and $115 billion to Australia's economy by 2030. Those early gains will go to companies that truly understand the shift underway right now.[32]
At Frank Advisory, we’re embracing AI across our own work and helping clients harness it to improve efficiency, scale capacity, and unlock time for strategy. From system design to implementation, we guide business owners through this transition with a clear focus on growth and value creation.
The future belongs to SMEs that adapt early. Let’s make sure you’re one of them.