Social outsourcing to developing nations: Implications for society and business

Abstract

Outsourcing in developing countries has experienced explosive growth in the last 10 years with overseas companies indifferent industries: Information Technology, Financial Services, Telecommunication, Consumer goods/services andManufacturing. The economic impact has been proven to be largely beneficial for both the company and the developingcountry. However, the social impact it creates needs further in-depth analysis. Social outsourcing means the contractingout of goods or services to social enterprises. Social Outsourcing could be the answer whereby a large organization’sagenda and the international development goals can be delivered at the same time. The aim of social outsourcing isachievement of socio-economic development in addition to achievement of the objectives of the outsourcing company.The BPOs bloomed across India by catering to the needs of the MNCs (Multinational Corporations) and their operationsmainly by providing technical assistance to Western customers over the last few years. These BPOs main valueproposition was cost reduction for originating companies by about 40% to 50%1. The main drivers of this industry havebeen higher efficiency, infrastructural support and available skill-sets. But this advantage has been eroding in recentyears. The industry is facing twin problems of supply constraint and rising costs due to lack of trained manpower thatare attributed to wage escalation and high attrition. Over the last few years India's US$14 billion1 BPO industry seemsto have been losing a battle with rising expenses. Real estate prices have been spiraling out of control and there trainingand recruitment costs have been rising along with salaries. To counter this trend BPOs have started to cast their netwider into tier 2 and tier 3 cities (defined as cities with a population of 5 million or less) to tap the talent pool availablethere. Consequently, the rural BPOs have been gaining momentum in recent years. Typically these have been captiveback offices of large organizations such as Tata Group, HDFC Bank and Wipro. Others have been small centresemploying about 100 people setup by entrepreneurs and NGOs such as DesiCrew, RuralShores, SourcePilani andHarva.It has become increasingly important to assess the social impact of outsourcing in developing countries to understandhow it can be used to deliver a large organization’s agenda and at the same time deliver development goals. Here, westudy the impacts of social outsourcing in detail and identify the future possibilities of social outsourcing between Indiaand European Union.