The Hindu Business Line : Outsourcing is two-way street

OUTSOURCING WILL REMAIN a two-way street, however much the cynics and critics of globalisation bemoan its supposedly harmful impact on jobs in the developed world. The recent decision of Bharti Tele-Ventures to outsource its information technology requirements to IBM for $750 million and to Ericsson its equipment maintenance infrastructure for $400 million some time ago, or for that matter, Dabur's decision to outsource its information technology functions to Accenture are instances highlighting the power of free trade to reshape economics in a globalised world.

These can easily be dismissed as rare exceptions in the multi-billion dollar one-way street of outsourcing from the developed to the developing world. But that misses out on the answer to a more fundamental question: What are these outsourcing moves seeking to achieve? For these Indian companies, outsourcing the hardware, software and information technology services helps them focus on their core businesses, be they cellular communications or consumer products. Substitute for the Indian corporates any American, British or Australian company then the impact of business process outsourcing becomes evident. What is being called a "jobless recovery" in the services sector in the US could well be due to a chunk of non-critical jobs (or the so called back-office operations) moving "offshore to cheaper locations" such as India. These non-critical jobs could be as diverse as data entry, medical transcription, customer service centres, insurance claim or payroll processing. Naturally the unions are up in arms in the UK and the US, where it is also the election year, but they ignore an important fact: A good proportion of these jobs which have moved overseas, say, to India or the Philippines always faced the risk of amputation by automation over a period. Companies in the US or the UK are developing "speech recognition" software and other innovations that may eventually take these jobs back. If the past is any guide, increasing deployment of technology has invariably led to greater job creation and there may be no exception this time around.

To characterise India as the villain of this BPO job migration piece is an exaggeration of the issue way beyond its actual implications. Low wages, high quality manpower, time zone differences and English speaking skills do make India an offshore destination of choice. But on closer observation the BPO trend is clearly turning out to be a global wave of consequence. Companies in Western Europe are increasingly setting up base in Eastern Europe; Russia is emerging as a force to reckon with; Japanese companies have been outsourcing to the Chinese market; and other Asian economies such as Malaysia or the Philippines are also getting their act together. Clearly, outsourcing is an inevitable outcome of globalisation, however much the US Government may try to rein it in through legislation. The sooner politicians realise this, the better it will be for global economic growth.

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