Outsourcings second wave

A new wave of outsourcing could be the globalisation of consumer services, says the New York Times.

So far, sending work abroad has been all about big business operations:

Computer programming, call centres, product design and back-office jobs like accounting and billing have to some degree migrated abroad, mainly to India.

The Internet makes it possible, while lower wages in developing nations make outsourcing attractive to corporate America.

In economic terms, there were economies of scale so that the most efficient Indian offshore specialists like Infosys Technologies, Tata Consultancy Services and Wipro Technologies could become multibillion-dollar companies.

Offshore outsourcing for big business thrived partly because the jobs were often multimillion-dollar contracts and the work was repetitive. It is not clear that similar success can be achieved in the consumer market. For instance:

Economies of scale will be more difficult to come by because customers are individual households and services must be priced in tens or hundreds of dollars.

Then there are the matters of language, accent and cultural nuance that promise to hamper the communication and understanding needed to deliver personal services.

Already, some American consumers voice frustrations in dealing with customer-service call centres in India.

Even optimists acknowledge the obstacles. In a report this year, Evalueserve, a research firm, predicted that "person-to-person offshoring," both consumer services and services for small businesses, would grow rapidly, to more than $2 billion by 2015. Yet consumer services, in particular, are in a "nascent phase," said Alok Aggarwal, chairman of Evalueserve and a former IBM researcher. "It's promising, but it's not clear yet that you can build sizable companies in this market."

Source: Steve Lohr, Hello, India? I Need Help With My Math, New York Times, October 31, 2007.

For text: http://www.nytimes.com/2007/10/31/business/worldbusiness/31butler.html

For more on Trade Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=42

FMF Policy Bulletin/ 06 November 2007

Publish date: 15 November 2007
Views: 926

Outsourcing, Labour

The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

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