Even when outsourcing spreads to all aspects of the American economy it remains an issue that many American corporations struggle with on a daily basis. Aside from controversy surrounding the loss of American jobs, companies must decide what processes to outsource and which countries to choose as offshoring locations. There are also privacy and security concerns surrounding the sending of information to offshore locales.
Countries like India, China and the Phillipines have experienced a spectacular growth in the IT outsourcing/BPO area. Ravi Aron, a professor of operations and information management at the Wharton School of Business at the University of Pennsylvania, estimates that between 2000 and 2004, the Indian outsourcing industry alone added 260,000 new jobs. Such tremendous growth has inspired other regions of the world to encourage outsourcing into their soil.
Following the success of countries like India and China in outsourcing, Dubai has begun development of a tax-free zone in which foreign-owned companies can do business-process outsourcing work, drawing upon Dubai's population of English-speaking citizens. Mauritius, an island nation in the Indian Ocean, wants to supplement tourism income with outsourcing, particularly in high-tech jobs. Its citizens boast fluency in French and English, attracting the attention of many North American companies.
Competitive moves by countries that have yet to make names for themselves in business process and IT outsourcing will result in established outsourcing specializing in the tasks they manage for Western clients. "I certainly see firms in countries like India and China beginning to specialize in newer forms of BPO services," said Giri Krishnan, equity analyst in the technology group at Morningstar Inc. in Chicago. "For instance, debt collection services in the U.S. are being outsourced to India. Firms like Reuters in the U.K. have been outsourcing key aspects of journalistic work to India." Krishnan reported that investment banks use analysts in India to handle basic financial analysis and model-building, and health insurance firms have generated enough business in claims processing that employees in cities from Bangalore to Delhi have received additional training.
Outsourcing has had a significant part to play in improving the standard of living especially in the growing economies of India and China. "All one has to do is drive down the streets of any major city in India, and you find anecdotal evidence in billboards advertising vacation resorts, multi-storied luxury apartments and the coolest automobiles," said Krishnan
Wages have risen so quickly in India that it's not much cheaper than Canada as an offshoring location. Canada has other advantages when compared with that on India, especially that of highly educated workers. Canadian workers have close familiarity with the U.S., enabling them to "handle all manner of calls, questions and cross-sales," said the Yankee Group's Fersht. Fersht believes India represents a "shortish-term phenomenon" in outsourcing. In the long term, Fersht said, locations in North America and Europe will challenge BPOs in India.
In recent years, U.S. marketers have shown interest in segmenting their customer bases, especially along ethnic lines. As outsourcing becomes more prevalent companies that serve a variety of consumer groups will look for bilingual workers. "There is a growing interest in the U.S. in the Hispanic market, but I haven't heard of extensive outsourcing" in Latin America, said Gallup's Jacobe. A recent report from A.T. Kearney noted that the Dominican Republic and Puerto Rico have ramped up their outsourcing capabilities to handle Spanish-language work from U.S. companies. Spanish language will grow in consumer business and related industries, especially that of air travel industry.
Other industries are less interested in language than in technical capabilities. Countries such as Russia and Brazil, with their large populace of skilled workers who will work for low wages, stand to make a killing in engineering-related outsourcing. China too is not far behind. Countries like China have always produced a lot of qualified engineers, many of whom have been migrating to the U.S. to occupy technology jobs in leading companies.
Companies that outsource are neglecting privacy and related security issues. Despite media reports about concerns over the safety of data once it leaves the United States, U.S. corporations aren't providing much information on their data policies. Once they hand off projects, Fersht said, most companies don't want to worry about the security of their data abroad -- that's the point of outsourcing.