With the sensitivities surrounding business process outsourcing (BPO) and its delivery offshore displacing employment opportunities from the local economic system, IDC examined and dispelled some popular myths associated with this contentious issue in its recent report, "Does Business Process Outsourcing Reduce IT Jobs in Asia/Pacific (Excluding Japan)?"
"As with any contentious issue, the rise of global delivery has been used and abused by vested interests for several years now. Clearly, whilst there are cases of poor management, it is a reality of business that global delivery also provides significant benefits," says Phil Hassey, research director for IDC's Asia Pacific Services Research.
Myth: BPO reduces jobs locally because everything gets moved offshore
Fact: It is inevitable that as economies and industries change, not every individual will benefit directly or immediately. This is also akin to higher-cost countries in APEJ that need to look at new ways of operating more efficiently and more competitively in a global economy. In the realm of BPO, operating on a global basis is a means to ensure that services (e.g. finance, HR or IT) are delivered in the most cost-effective and efficient manner. As a result, a group of individuals may need assistance to find alternative employment opportunities and not feel like a "sacrificial lamb" for the broader economy. While it is unfortunate that some people do get retrenched, the reality is, more people also get employed and more opportunities exist than before as the economy grows.
Myth: BPO exploits the "lowly paid" worker
Fact: The BPO industry is often accused of running sweat shops in low-cost countries and exploiting labor in these countries to reap maximum profit from the poor workers. One may compare the large salary difference between a call center agent in India versus a call center agent in Australia. However, the salaries paid to offshore workers in low-cost countries are often many times higher than what a worker in these countries would earn in other traditional sectors. Many gain the opportunity to own more consumer goods, live a middle-class life and break out of the poverty cycle. Therein also lies the risk of exploitation, which needs to be addressed by the appropriate authorities to ensure that the BPO industry does not suffer an image perception which has befallen other industries such as the garment and apparel industry.
Myth: When it comes to outsourcing, companies will choose to offshore everything if they could
Fact: Offshoring is not necessarily a panacea for all of a company's cost issues and strategies. It boils down to whether the offshoring model aligns with the company's business objectives and meeting their customers' needs. It also depends on whether companies are ready to take on offshoring as part of their operating model. It is important to note that not every business function can be offshored, and often times, strategic areas such as corporate strategies, sales, governance, and policies still need to be retained in-house. Rather, BPO presents companies with the option to outsource non-core business activities so that efforts are focused on their core business. Offshoring, in fact, does not necessarily mean outsourcing and many companies do maintain shared services in another location, yet still have that service retained in-house.
How should governments in developed countries in APEJ respond to offshoring?
The government could help displaced workers re-skill and move on to do different tasks through incentives and training schemes. This is better for the economy in the long run instead of discouraging companies from offshoring or handing out penalties for companies that do so. Alternatively, governments could also join in the game by trying to encourage offshoring to be located in their territories.
"We've seen similar patterns in the manufacturing sector, the garment sector and now the BPO sector where globalization dictates a shift towards producing where it makes sense. Countries need to adapt and move up the value chain or risk getting left behind", says Conrad Chang, Research Manager for IDC's Asia Pacific Business Process Outsourcing. More findings can be found in this IDC report, "Does Business Process Outsourcing Reduce IT Jobs in Asia/Pacific (Excluding Japan)?"
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