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.
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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 BotÃn, chief executive officer of Santander UK, commented: â€œImproving 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.
â€œThis 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.â€
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.
benign0 is the Webmaster of GetRealPhilippines.com.