Inside Outsourcing
The effects of offshore outsourcing on American workers has become a hot topic in the months before the November election. But what happens at the other end of outsourcing, aside from sleep disruption for call center workers in Asia? What are the business, social, and ethical implications of outsourcing to developing nations?
Professor Paul Argenti put these questions and more to four panelists in Whittemore Hall on April 6, 2004, as part of a panel put together by Tuck's Center for Digital Strategies. The panel was part of a unique collaboration between the center and Dartmouth's Hopkins Center, as a prelude to the production at the Hop of Alladeen. This multimedia show interweaves live theater, high-tech video, electronic music, and spectacle to examine how cultures borrow and re-interpret each other's icons and images in the new global economy. It is a modern interpretation of the central theme of the ancient tale of Aladdin: transformation.
The panel's audience filled the Great Hall to capacity-including spectators in the balconies.
Panelists quickly pointed out that, while offshore outsourcing is comparatively new, outsourcing among American firms has been going on for decades. They agreed that offshore outsourcing-which includes high-tech PhD work as well as low-wage call-center jobs-can have profound effects abroad. But some said not all the effects are adverse.
"There are social dislocations among the workers, and that concerns us," said Jack Freker, president, customer management group at Convergys, the nation's largest publicly traded outsourcing firm. "Their sleep cycle is off; their social structure is upset." But, he adds, the first time he went to India he was amazed to see women and children with buckets of rocks on their heads, removing fill from trenches for fiberoptic cable. Now, just four years later, Freker sees women and children not with rocks, but with cell phones, strolling the streets and shopping at malls that have sprouted from vacant fields. Their cultures are undergoing wrenching change, but they are much wealthier.
Panelists suggested that the economic incentives driving offshore outsourcing won't continue indefinitely, and that offshoring accounts for less than one percent of the jobs that vanish in the U.S. each year-automation and other innovation account for the vast majority. And outsourcing goes both ways. "I don't know of a single investment banking deal that did not go through New York," commented Paul Gaffney, executive vice president for supply chain (and former CIO) at Staples.
Savings through offshore outsourcing range from 25 to 90 percent, Argenti said, citing observations made during his recent sabbatical in India. Still, several panelists said savings often are less spectacular than people think. While labor may drop from $14 an hour in the U.S. to $2.50 an hour in India, Freker said, companies there often must "pick people up at home and return them after work. You feed them three meals a day, and there are telecommunication costs." Thus, his company's net savings for offshore operations are 40 to 50 percent.
Call center wages of $12 an hour drop to $9 at Canadian locations, which are in American time zones and avoid political unrest. But that advantage is vanishing as the greenback declines against the loonie. If you offshore, Freker pointed out, "you are in the (currency) hedge business as well." Wages in India rose 14 percent last year, he said. Sonal Shah, associate director for economic and foreign policy at the Center for American Progress, noted that the rupee is also rising against the U.S. dollar.
Keith Khan, co-creator and co-director of Alladeen, said he found it odd to be discussing offshore outsourcing only in economic terms. "What is shocking to me about this is the culture shock," he said. Alladeen explores "cultural eradication," which is happening in other countries as a result of the application of technology. "Schizophrenia is one of the largest growth industries in Bangalore," he said. "What does this mean?"
Freker said Convergys doesn't put call center workers through three weeks of intensive training to deceive Americans, but to make sure calls are intelligible and efficient. "You know you are talking to an agent in India, regardless of the amount of training," he said.
In fact, technology, rather than outsourcing, is the subject of Alladeen. In Britain and America, Khan said, technology often induces people to engage in solitary activities instead of social ones, like playing cards or dancing. "Is this the world we want to live in? Is technology bringing us closer together?"
At day's end in the U.S., doctors' notes are sent to be transcribed and analyzed in India, where it's daytime, by bright college graduates, who at least lose no sleep. College graduates here, Khan said, "wouldn't touch those jobs. But they will do it in India, in the desire to escape or transform themselves."
An audience member asked: Can people interact across cultures in a way that is neither demeaning nor destructive?
"I'm not sure," Khan responded. Even among cultures considered closely related, there are profound differences. Indian English is its own language, and even British English differs from American English. Perhaps, Khan concluded, this indicates an innate resistance to the submergence of local cultures-and it may be a good thing.
The points of view expressed during the discussion "reflect the complicated dimensions of a topic that incorporates business, cross-cultural, social, economic, and even ethical issues," says Hans Brechbühl, executive director of the Center for Digital Strategies. "We're thrilled to have been able to work with the Hopkins Center to make this happen."
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