Offshore Outsourcing of Information Technology Services
From the Archives
Posted on July 30, 2004
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The outcome of this trade has been the relocations of certain types of services sector jobs to those developing countries that offer relevant expertise at a much lower cost. The business logic is simple. As a trade journal puts it, for a company such as Microsoft, it makes little difference if the employee is located 6000 or 60 miles away, so long as he or she is connected to the net and has the required skills.
The fresh graduates of the prestigious Indian Institutes of Technologies and Managements can provide companies like Microsoft or Oracle, business and technical skills at an average wage of $15,000 dollars that would cost the companies $85,000 dollars to hire in the United States. The cost differentials are equally striking at the other end of the spectrum that needs relatively less training and skills, such as in customer care services in the call centers. Whereas a woman employee in her twenties, often a university graduate, at a call center in Bangalore, can expect to get a salary around $5000 per annum, her counterpart in the States, usually a high school graduate, will cost the companies $25,000 or more.
It is not surprising that a large number of companies such as American Express, British Airways and Dell have sent their back office operation offshore. In the UK Unions have predicted that up to 200,000 jobs in the finance sector would soon leave, mostly to India, as companies take the advantage of cheaper labor cost in the developing world. A. T. Kearney Inc in the US predicts that more than 500, 000 services jobs will go offshore by 2008, as state governments in the US, like the private sector, increasingly use offshore outsourcing to manage everything from accounting to their food stamp programs. The results, if the predictions prove right, will be dramatic. By 2008, ICT services and back office work in India is expected to swell five-fold to a $57 billion employing four million people and accounting for seven percent of India’s gross domestic product. India’s export oriented ICT services are expected to generate 20 million jobs by 2020.
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The opportunities for women, in the emerging global digital economy, come not so much from the high value end of the information processing work, such as software programming or system analysis, as from the relatively low value added operations that include a wide range of activities from customer services in call centers to secretarial work for medical transcriptions. These are categorized as Information Technology Enabled Services (ITES): jobs related to these services require proficiency in written and spoken English, familiarity with the culture of the client countries as well as social skills. Although precious, these skills do not need training of elite and expensive institutions; hence can be acquired by those, who, because of their class or gender, do not have access to elite technical institutions.
My research in India last month gives me reasons to be optimistic. In call centers in India, the proportion of women in total employment could be anywhere between 38 to 68 percent. The rapid growth in the ITES jobs has given women a new confidence and social empowerment, as has not been experienced ever before. Two hundred dollars to $400 per month, although small by the standard of the richer countries, is a high salary in India or the Philippines and assures a woman, in her twenties, a quality of working life that is much better than what she could have had in traditional feminized occupations.
There are, of course, areas of concern. The repetitive nature of most of these jobs, at times, leads to the burnt-out syndrome. There are reported cases of stress and anxiety that some women face from the pressure of having to be familiar with the accent and life style of client countries that the offshore companies serve. Moreover, a substantial number of ITES jobs are likely to be automated in the next phase of automation: so, one can argue that the benefits of globalization and of the global mobility of jobs to women of poorer countries are going to be merely short term. The growing pressure for protectionism in the developed countries also threatens the sustainability of relocated ITES jobs. Yet, one should be careful not to stress the negative dimensions too much. My preliminary investigation in this field indicates that benefits to women from offshore outsourcing is, in most cases, higher than the costs. One should not be too obsessed with the short-run nature of the jobs either.
Long term consists of a series of short terms and the challenge of the development community will be to ensure that women gain access to appropriate training that will enable them to have an equitable share of employment in each phase of technological changes and trade regimes. It will be vitally important for the research community and the policy makers to have partnership with the private sector for assessing future trends in the market for skills; the knowledge will be essential for grooming women, on a par with men, for tomorrow’s jobs.
The benefits of offshore outsourcing, so far, have been confined to a limited number of developing countries. India is the most prominent one of them all. It is, indeed, rare to read or write on the phenomenon of outsourcing these days without a reference to Indian cities, such as Bangalore. The question that remains to be asked at this stage is this: can the Bangalore phenomenon be replicated elsewhere? Malaysia, the Philippines, the West Indies and South Africa are a few other countries that have made some headway but the rest of the developing world are still excluded from receiving the relocated jobs. Will it not be important for the development community, therefore, to assess the ingredients of success of the pioneering countries and to evaluate the possibilities of hitherto excluded countries in the light of the gained knowledge? It will be prudent to acknowledge that the prospects of women in poorer countries, first and foremost, will depend on the position of these countries in the digital world.
Contributed by Swasti Mitter, international ICT and Gender consultant. Reprinted with permission from Development Gateway.
To read another Global Envision article about offshore ousourcing, see Offshoring and Globalization.
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Comments
Comment on RE: Indian offshore call centers 'not doomed'
As per my concern which we are seeing that Indian offshore call centers are proving by self as boon to the country economy as well as it is good centers which are providing better opportunity to the job seekers to earn at the time of learning . Call center act as a bridge between company and the customer, where customer can contact to company for relevant query they have.It also provide a diversity of services to companies such as order entry, customer service, and technical support to customers. As this is proving by itself as a boon as well as it is creating boon in the job providing sector by providing all the facilities to the employees.