US anti-outsourcing bill: Why Filipinos should be worried

Not surprisingly, there is a growing public and political lash out against outsourcing in recession-hit America. An “anti-outsourcing” bill had recently been introduced in the United States House of Representatives to implement measures that would, in effect, penalise businesses that relocate their call centres offshore.

“Outsourcing is one of the scourges of our economy and one of the reasons we are struggling to knock down the unemployment rate and reduce the number of Americans who are out of work,” [Rep. Tim Bishop (D-N.Y.), who introduced the bill] said in a conference call with reporters. “We can’t prohibit it, but we can certainly discourage it.”

Outsourcing has long been pitched as a measure to improve “efficiency” in a business by transferring labour-intensive operations to countries where labour costs are lower. However the “efficiency” gained by doing so is not a true improvement in productivity in the true sense of the notion of increased efficiency being the outcome of increased output relative to input. There is nothing such in outsourcing. Much of what a business gains in outsourcing comes mainly from the wide disparity in the value of labour between rich and poor nations as measured by the monetary system. The only real winner under such an arrangement are the large corporations that enjoy this artificial efficiency gain. The efficiency gain is artificial because the cost saving is an outcome of a nuance in the world’s monetary system — it debits Third World labour and credits Big Corporate profitability and bandies this equation as “efficiency gain” even as it erodes overall national productivity from underneath.

A worker in a country like Bangladesh can produce a unit of work (say, 15 minutes’ worth of customer assistance over a phone line) at one twentieth the cost that her counterpart in the U.S. would. But that does not mean Nishat over at Dhaka does the job any better than Sally working out of her Fresno office. Measured in physical units, the quantity of resource input (energy, land, buildings and facilities, and actual warm human bodies) into a call centre operation in Dhaka most likely does not differ much from that of a similar sized one based in the United States. Remove money from the analysis, and the true efficiency picture emerges.

More importantly, in terms of customer satisfaction, the average American will most likely come out of a call with Sally a lot happier than if he had spoken to Nishat. In the past, businesses regarded their departments tasked with handling customer queries complaints as cost centres, and as such, outsourcing these was at the time considered to be the sensible cost reduction initiative to implement. However, as more managers shift their thinking to seeing call centers more as value-adding services rather than necessary evils, a lot more context to how their contribution to the business is measured has been added. As such, cost is no longer the only parameter. One of the top banks in Europe, Santander UK has started acting on the basis of this new focus

Ana Botín, chief executive officer of Santander UK, commented: “Improving the service we offer is my top priority. Our customers tell us they prefer our call centres to be in the UK and not offshore. We have listened to the feedback and have acted by re-establishing our call centres back here.

“This is a great example of how we are redefining Santander UK and putting our customers first. This is a major step for us and I am determined that we will do even more to improve the service we offer as I plan further initiatives later this year to build on the progress we are making.”

The results are quite evident…

The initiatives implemented so far have helped Santander reduce the volume of complaints in the last year, and mean that 80% of all complaints are now dealt with within 48 hours. [Financial Services Authority (FSA)] data also showed that the volume of banking complaints received by Santander fell by 24% from the first half of 2010 to the second half.

The messages being sent out by the new world order and global economy to business and economic managers seem to be crystallising:

(1) retaining customers has never been more important to businesses and therefore ensuring what remaining customers they have are not put off by bad service becomes a priority;

(2) persistent high unemployment even as some economies recover requires stepped up effort to induce job creation by localising operations; and,

(3) real productivity and efficiency gains (the sorts that build and build upon a sustainable production capacity to underpin the national economy) need to be realised through technological innovation rather than relying on cheap offshore labour.

What does this mean for countries such as the Philippines whose economies rely heavily on labour-added value services such as foreign worker remittances and the hosting and providing of outsourced services? It means that these countries also have to mount initiatives analogous to the above three:

(1) Build stronger value propositions for its industrial base and national portfolio of products and services;

(2) Create jobs by focusing on producing; which is an outcome of initiatives to,

(3) Build the capital base of the economy so that it is able to rely more on domestic commerce and investment rather than on foreign capital, foreign income, and consumption of foreign products.

These are all too hard of course for a country where political circus trumps nation building in the agendas of the majority of its politicians, more so considering that the current system of government rewards short-term spectacular gains at the expense of long-term quiet achievement. Whether the Philippines will be able to respond to these challenges depends on whether its society can start looking beyond its petty National “Debate” to the important stuff going on around it.

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27 Comments on “US anti-outsourcing bill: Why Filipinos should be worried”

  1. Kasalanan ito ni GMA. Ginawa niya tayong dependent sa mga call centers. Dagdag problema na naman ito kay Noynoy pag nagkataon – n0ytard.

    Arroyo co-opted with the US and EU governments – Lacierda

    1. ang masasabi kolang sa mga empleyado ng call center ay magumpisa na silang mag ipon ng pera para pag inalis na ang callcenter ay may naipon na silang pedra dahil mahirap mag hanap ng trabaho ..kung kaya nilang magtrabaho sa ibang bansa ..dahil masmasarap sa sariling atin tayo nagtatrabaho .

  2. the issue is
    a holistic ict government strategy/framework.
    currently too much fragmentation/agencies who like to go to seminars/conference meetings, eat and achieve nothing other than agreeing to have another meeting

    a focus on training/skilling for value added services bpo/kpo. the growth rates for call centres per se have peaked for some of the reasons you state

    more creativity/innovation for software and app design

    attention to competitors who are moving ahead rapidly and eroding the primary differentiator of english language superiority

    utility prices and services. the quality and cost of power and telecoms due to monopolies is high and network poor

    quality management/customer service not a natural strength

    thete have been successes but it is the lack of strategic planning and development which leaves the country vulnerable to one external change. at present there is no plan b – except god will provide!

    1. Except the issue is there’s a backlash against outsourcing for outsourcing’s sake, regardless of how good the service is. It’s not a quality or efficiency judgment on the part of US lawmakers, it’s more or less a moral one. It’s going to challenge this country and a lot of other ones to suck it up, develop themselves, and quit waiting for someone to bring them the gravy – it makes good sense from that perspective, and it makes damned good sense from the American perspective. I’m all for it.

        1. the jobs aren’t scripted. you need to have a good command of the language otherwise, you’d just sound stupid.

  3. “More importantly, in terms of customer satisfaction, the average American will most likely come out of a call with Sally a lot happier than if he had spoken to Nishat.”
    Most companies (the smart ones anyway) would have several vendors and several locations. They compare each locations customer satisfaction survey results. So it’s usually India vs. PH vs US/Canada/UK or whatever is the local country. I’m not disagreeing with the article. And it is likely that the scenario mentioned in the article happens a lot. This is usually a result when customer service is outsourced too soon and too fast. A good American call center agent is also difficult to find. They usually don’t have the patience to deal with their fellow Americans and they don’t consider it as something you can make a career out of. It’s just a temporary McJob for them. So a good number of agents here really take the job seriously. I don’t know the costs in India to compare to the Phil. US is shifting towards work at home agents. I only see the results between the different locations. Also a good number of agents in the US are immigrants which at times have thicker accents than PH agents.

    The call center/BPO industry can’t last forever. So far I don’t think there is one large industry that can employ majority of the population for more than one generation. The jobs available during my parents time is different. I gave their industry a try but it’s not worth it. For some their parents generation made a lot of money (pesos) with nursing and now it’s just not the same. I’m sure when my kid starts working years from now, call centers are a thing of the past.

    1. “A good American call center agent is also difficult to find. They usually don’t have the patience to deal with their fellow Americans and they don’t consider it as something you can make a career out of. It’s just a temporary McJob for them. So a good number of agents here really take the job seriously.”

      -i believe everything, including this had been considered when the first movers of BPO industry decided to “outsource” their jobs, since its a business, they would always go for more effecient way with the lowest possible cost.

      The Phil agents have a one step ahead advantage in maintaining and growing this kind of service. all they have to do now is to show that during this times that “customer service” and “man power” is needed, they would go above expectations, so as not to lose the current clients that they are catering.

    2. Senator Tim Bishop would like to discourage American Companies from outsourcing for an obvious reason -Quality of Service and Strategic Business Opportunities for the Economic Growth of the United States Of America. He’s not even aware of the multi culture in his country spawning lots of immigrants in reaching their American Dreams that makes America denser now that catapults their unemployment rate.

      While most Filipino people do not have the mainstream education to begin with, our only bread and butter is the inert skills that we acquire from different experiences and life’s struggle. Have you guys wonder why most of the Filipino agents are single mothers, High School graduates, Under graduates, College degree holders, and even Professionals?. Why they chose to work in this kind of industry and environment?. Simply because it’s the kind of job that never discriminate as long as you have the skills needed for the job. It doesn’t matter if you have the complex portfolio or vast work experience or numerous citations, recognitions and awards or just being plain and simple as long as you got the skills, you’re in it to win it.

      It’s good for an individual to learn many things than the usual linear way of acquiring knowledge. In a BPO industry, given the proper, extensive and ample training to an skilled individual, is like planting a seed that you’ll reap productively in the long run. In a business sense, being efficient and effective plays together. You can’t do the right thing if you’re not doing things right. If outsourcing is discourage then businesses will be affected financially. It’s a trend for globalization and a new approach for economic paradigm shift. It means technology breakthroughs and advancement. It will boost global economy and not just one with nation and will strengthen international relations among countries.

      BPO industry in a positive perspective creates jobs and expands business. It’s a matter of excellent management, good incentive schemes and pay outs, health benefits and career growth programs. This is an industry wherein skills and proper behavior and attitude is the key to success and growth.

  4. On the economic level… BPO has provided jobs… lowered the unemployment ratio…

    On the political level… they’ve created it… will will continue to do so… see the above…

    On the cultural level… AIDS, dysfunctional relationships between spouses and mag syota. LIVE WITH IT!!! so is the OFW phenomenon.

    Who’s to blame… NONE. It’s a global phenomenon and the natural behaviour of the FIRM.

    Do we need to be afraid? nAAA… the firm and the household will always behave as they do. The firm will always look into cutting cost. The labor unit in the household will always look for income opportunity.

    BOTTOM LINE: LIVE AND LET LIVE… IT’S GLOBALIZATION FOLKS. Freedom of movement of goods, services and persons. AMEN.

      1. the firms will always consider the high labor cost if they are in the US and the more developed countries such as UK, New Zealand, Canada, Australia and the Scandinavian countries.

        US has two problems… increasing UNEMPLOYMENT RATIO and LABOR COST. The drafted law on outsourcing by the senator you’ve quoted is not prohibitive… but “discouraging”.

        the thing that BPOs in the Piripins should worry is how to still improve their services to cope up with the competing countries such as India and Bangladesh. recent studies show AIDS is an increasing phenomenon among BPO workers… and that worries me. yung si Penoy may HIV na may AIDS pa (Hair is Vanishing – As if Doing Something) pati ba naman mga call center agents,.. tsk tsk tsk…

        1. pare pilipino kaba o koreano o mexikano dahil hindi kami tiga piripin at ang penoy na sinasanbi mo ay itlog na nilaga ha!ha!ha!sabi mo may si penoy ay may Aid bakit kostomer mo ba sya

  5. And what other jobs apart from outsource services have been created thus far? NONE OTHER.

    No manufacturing, no medium/heavy industry, no industrial farming, no commercial mining, no high-level entrepreneurship.

    Don’t blame the US for the lack of jobs in the Philippines; blame our own idiots in power, from the barangay officers and their bullshit “social acceptability” requirements to the Congress and their payola, to the Executive (whoever sits there) for inconsistency of policies.

    That’s right, Juan dela Cruz: It’s about time you realize that your employment opportunities are your own fault.

    1. I agree, they ruled that MANUFACTURING is a “sunset” industry and would be slow to act on issues related to the improvement of our manufacturing sector…thus we lose out to countries like China, Vietnam, etc..countries who still VALUE the industry…compared to them, we’re unproductive and we are not contributing to the GDP…:(

      We used to excel in manufacturing. We still produce really great quality products but other countries are beating us in terms of cost. We do things better here, but we don’t do it cheap enough. What has become of pride has become our bane of sorts.

      Its a really flawed focus, considering that only graduates and people who are fluent in English are allowed to work in callcenters…there’s still a great MAJORITY of us who don’t have that as an employable skill.

      If only we strengthen also strengthen and enable more people to be skilled workers, more people would have jobs. We’ll also have a higher range of people with jobs–no just a particular group. I know English is already an asset that is already there, but we can’t really put our eggs in one basket…balance is key.

      1. I agree. You also have an imbalance in population – too many unproductive people. As Benigno wrote before.

        No matter how much we strengthen and enable people, there just wouldn’t be enough jobs if there are too many people on the que. The skilled and even the professionals would end up underemployed or worst unproductive, non-income-generating part of our country (another mouth to feed) if excessive population growth is not mitigated.

        While the government makes measures to develop the Philippines into a country lucrative to business investors, the people, at the same time, should make self-improvements within their families by not bearing too many children they could not fully support. So in time, job opportunities would be sufficient for job seekers and households could make investments on extra income they have. By this, we could weather changes in the business environment affecting employment.

        Anyway, GMA focused on BPOs maybe because other types of businesses would not invest in our country. I don’t know. Under President Pnoy’s watch, is our country attracting good investments?

  6. Which is better, an expense of $ 2000 a month for an American call center agent or $ 2000 a year for a Filipino one? I can see a defeat of that bill in U.S congress.

    1. I wish, my sister is working in that industry.

      But if unemployment worsens in the U.S. due to recession, they would certainly make tighter measures to ensure increase in local employment.

      Let’s pray our government encourage other types of FDIs in the Philippines.

    2. malapit na ang election kaya baka pumayag na ang mga politiko dahil panay ang rally ng mga tao dito sa america pati narin ang mga iligal na tagongtagong pilipino na pinitisyon ng kompayang pinagtatrabahuan ay denideport na..pati narin ang mga iligal na mexikano na nag tatrabaho sa constraction ay umuuwi na sa mexico.dati ang dami ang nakatambay sa lumber hardwake store ngayon kakaunti na ..

  7. I am working in the BPO industry and i hope we don’t generalized all the call center people to have AIDS or having sex or having infidelity concerns. marami sa knila ang nagtatrabaho ng maigi. I am medtech by profession pero ndi kaya ng isang local na medtech ang gastusin ng isang single mom (it happened when i just graduated ) and also the breadwinner of the family. Even if we don’t like to work in the BPO industry, we don’t have another choice not unless we work abroad.

    If this bill gets approved, I wonder what would happen.

  8. IF the bill gets approved. It’s just one bill, and while there might be supporters for the congressman, they aren’t loud enough yet. This will hurt manufacturing jobs in China more than service jobs in the Philippines, simply because there are more skilled American workers losing jobs to manufactureres in China. And BPOs in the Philippines have diversified from call centers to real service centers that do non-talk functions such as legal assistance, HR, and higher-tier occupations that supplement, not compete with, US jobs.

    And the problem still lies not with the US, but with Philippine industrial and employment policies. The Constitution encourages oligarch-dominated businesses, there is practically no incentive for establishing heavy industries, and entrepreneurship is strangled by very insular-minded local governments.

    These, by the way, are essentially the same reasons why Filipinos would rather work abroad.

  9. Agree. In a way the reason why they focus on BPOs is to seem that THEY ARE DOING SOMETHING to bring jobs to the economy, because really, its easier to bring more of these than to fix what’s wrong with our system that prevents other businesses from investing here and other things.

  10. The bill could pose a huge problem for the Philippines. I think the Filipino resiliency and resourcefulness will help us make it through ^_^

    1. Might as well detail out the Filipino resiliency and resourcefulness. Last I checked, it was 30% of the population that actually paid income tax. Those are the resilient and resourceful ones. The rest are lazy and mangmang.

  11. ang hirap sa mga tao ng gobyerno sa pinas ay masgusto panila na magimport dahil marami ang mga emplyado na kumikita sa lagay gaya ng bigas bili sila ng bili sa vietnam tapos nabubulok lang sa bodega ..ang hindi ko maintindihan ay ang mga tao sa thailand ay ay nagaral sa pinas kung papaano ang pagsasaka tapos dito sa america puro thailand rice ang nabibili dito walang philipines rice ..

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