Outsourcing: Beyond Good or Evil
By Fatima Tuz Zahra
The topic of discussion for this week is not novel for our ICT readers. Outsourcing is a controversial issue, more specifically “impact sourcing”, which aims to create job opportunities in the low-income countries through the creation of microworks. Microworks are small-tasks requiring low-level skills but could be time consuming and as such are outsourced to the countries that can afford cheap labor (Please refer to Naoko’s piece for details on microworks). A major question being dealt with on this topic now is if impact sourcing, which generates employment in the developing countries, takes away jobs from the developed countries.
Outsourcing to change the world?
David Bornstein, in his article, reports two opposing positions taken up by the various stakeholders for and against the expansion of outsourcing in developing countries. Currently it is estimated that by 2015 outsourcing will create 780,000 more jobs. However the majority of Americans (around 70%) is against this prospect arguing that it will only benefit developing nations and translate to job loss in the US. Moreover, many American consumers still consider the US to be a leading job creator globally.
Although a considerable number of people saw outsourcing as exploitation of cheap labor force, statements in support of outsourcing came from the owners of non-profits. The owners believe that the “lowest rung of outsourcing work” only benefits the very poor. It does not have a significant market and cannot bring about any difference in the economy of high-income countries like the US.
The article concludes by saying that outsourcing does not really take jobs from the developed countries and explores the possibility of creation of “domestic outsourcing”. One such endeavor is Samasource that is recently trying to replicate its impact-sourcing model in the low-income regions in the US to create employment for people living in areas with minimal infrastructures even within a developed country like the US.
David Bornstein aims to address the charge that outsourcing potentially harms the economies of the developed countries and does so successfully. However, what is interesting to notice in the discussion is that the needs of the developed countries are seen as primary and that of the developing countries are secondary if his rationales for outsourcing or impact sourcing are to be generally acceptable. It is clear in his argument that people in the developing regions with moderate skills can have opportunities for employment only as long as those jobs do not have any demand in the developed regions.
Besides at present it may be justifiable to pay an Indian professional much less than one in the US (because of different exchange rates in the two countries). However, it is reasonable to assume that the rising cost in living around the world will see a growing pressure in the outsourcing market from the lowly paid labor force. Already companies are shifting their outsourcing cites to Pakistan (50% lower costs and over 200,000 IT graduates looking for work), Bangladesh or Vietnam from India and China as the cost of outsourcing is rising in its older and more popular sites.
Furthermore, domestic sourcing could be interpreted as another way to deal with the challenges that emerge in the outsourcing model. Samasource, looking at domestic sourcing may therefore address the risk involved in “supply chain delays, language and culture challenges, distance management, loss of intellectual capital” and so on. Most of these have been concerns for some of the current outsourcing stakeholders.
A post-modernist interpretation
The debate whether outsourcing is good or evil cannot be answered in a word or two. While impact sourcing has helped people in low-income countries through employment without threatening the economies in the developed countries only “a small part of the total retail price lands up in that country” which outsourced. Most income is drained out by the retailer, wholesaler, distribution system, research, design etc. This means that while impact sourcing may not be evil enough to harm the economies of developed countries like the US it could be argued to only minimally help the developing nations’ economy.
Perhaps the most important reason impact sourcing has gained impetus in the globalized market is because it provides cheap human resources. Looking from a post-modernist perspective it can be understood that meta-narratives such as the nations no longer hold true in the globalized market economy. In addition to the resources required, the processes of productions are no longer dependent on the borders of nation states but solely on the operations and needs of the multinational corporations.
The current market of impact sourcing or future growth of domestic sourcing will be dictated by the needs of the corporations (which is the needs of capital) rather than the nation (which ideally articulates the needs of citizens). The corporations will decide who will receive most of the outsourced work and who will benefit from it depending on who can provide the cheapest labor, thereby reducing production costs.
As an end point, I would posit that the 780,000 jobs that are estimated to be created by 2012 by impact sourcing will not drastically affect the global economy. However, it will still be interesting to see if outsourcing will support workers from the low-income backgrounds more effectively or will it, as is often argued, function as another mechanism for exploitation.The people in the developing countries expect to get employment and better salaries from working in outsourcing firms. The natural consequence of such expectations are that they learn English and computer skills to operate in the field. However, as we can see there is a gap in expectation and the outcome of the education and employment. The microworkers do not get paid as much they would like to get paid. Then the question is whether a larger section of people in developing countries should still spend long time on learning English and outsourcing skills!
Outsourcing is Not (Always) Evil on November 8, 2011 The New York Times Opinionator goo.gl/ZWoBt
Outsourcing: Where’s Uncle Sam? Retrieved from goo.gl/3LtAC
The future of outsourcing: Impact on jobs Retrieved from goo.gl/Tpp43