OUTSOURCING'S SECOND WAVE?
November 1, 2007
A new wave of outsourcing could be the globalization of consumer services, says the New York Times.
So far, sending work abroad has been all about big business operations:
- Computer programming, call centers, product design and back-office jobs like accounting and billing have to some degree migrated abroad, mainly to India.
- The Internet makes it possible, while lower wages in developing nations make outsourcing attractive to corporate America.
- In economic terms, there were economies of scale so that the most efficient Indian offshore specialists like Infosys Technologies, Tata Consultancy Services and Wipro Technologies could become multibillion-dollar companies.
Offshore outsourcing for big business thrived partly because the jobs were often multimillion-dollar contracts and the work was repetitive. It is not clear that similar success can be achieved in the consumer market. For instance:
- Economies of scale will be more difficult to come by because customers are individual households and services must be priced in tens or hundreds of dollars.
- Then there are the matters of language, accent and cultural nuance that promise to hamper the communication and understanding needed to deliver personal services.
- Already, some American consumers voice frustrations in dealing with customer-service call centers in India.
Even optimists acknowledge the obstacles. In a report this year, Evalueserve, a research firm, predicted that "person-to-person offshoring," both consumer services and services for small businesses, would grow rapidly, to more than $2 billion by 2015. Yet consumer services, in particular, are in a "nascent phase," said Alok Aggarwal, chairman of Evalueserve and a former IBM researcher. "It's promising, but it's not clear yet that you can build sizable companies in this market."
Source: Steve Lohr, "Hello, India? I Need Help With My Math," New York Times, October 31, 2007.
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