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Vodafone - Outsourcing menace!!!
Posted on Wednesday, January 8th, 2014 at 1:34am CST by Promarket C.
Location: Vodafone Group Plc
BERKSHIRE, NEWBURY, RG14 2FN, UK
Why is Outsourcing(especially chat, email, analytics) hurting the interests of developed nations more than anything else?
Labor laws in development countries leave a lot of room for litigation, makes labor inflexible and controlling labor in free society is too much of a hassle. Countries like India are okay with their currency moving on a downward spiral at a marginal rate as Forex reserves matter more. Indian IT companies have been able to maintain around 30% margins consistently inspite of being most competitive on cost front. Now it is the good quality jobs that are being stolen. The bad ones aren't being preferred anymore as they offer lower margin. Automation in manufacturing has made service jobs too valuable to let go. Now the worst form of nerve wracking call center jobs are better than the best one can get in the so called developed economies. Also unlike voice jobs; chat, email and analytic jobs can't be traced to their origin.
WHY DO OUR COMPANIES OUTSOURCE THEIR BUSINESS PROCESSES? IT IS NO LONGER CALLS. IT IS MORE OFTEN THAN NOT WEB CHAT, EMAIL,
1. Labor market arbitrage
2. To avoid scrutiny
3. To avoid unions
4. To hoodwink our regulators
5. Flexibility - able to hire and fire workers - hourly pay
6. Unavailability of skilled labor in local market is actually a great alibi to justify of-shoring
7. Better/despotic control over the business
8. To avoid sharing too much sensitive data with too many people in domestic market
9. Poor labor rights abroad
10. Managements desire to save own skin which would otherwise be on line if the process were to be automated
11. Of-shoring has made developing markets like oil economies. Their own economies provide very little rights and opportunities
12. Countries like India score lowest on Transparency index and ease to start a new business index,
suffer from hunger, starvation deaths, malnutrition, open defecation....
13. Culture of sycophancy and graft widely prevalent in Indian and Philippines market.
14. Hospitality offered by the companies like TCS, Infosys, Wipro, Accenture, IBM and others in the developing geographies.
15. Possibility to fudge records and conceal malpractices
16. Willingness of vendors to go the extra mile to please their clients
17. Almost non functional judicial machinery in developing geographies
18. Ego massage
19. Ability to keep workers on tender-hook and deprive them of modern day labor rights.
20. Ability to conceal a sweatshop within a luxurious set-up
21. Absence of real democracy and vibrant fourth estate in places like India
22. High level of corruption prevalent is developing economies
23. Opportunity to launder money
24. Ability to keep corporate governance issues at bay
25. Fungibility of back-office jobs like email, chat, analytics, data entry...
26. Hold back facts from investors and crusaders in our economy who may otherwise take the board of directors and management to task
Why is of-shoring hurting us too much now more than ever before?
Well automation is driving down demand for labor in our economies if they've not been stolen already.
WHAT IS THE BIGGEST MYTH ABOUT OUTSOURCING?
Oh!, it is probably created by our own media. It is that outsourcing cuts cost and improves quality. There is no way to reduce cost as such set-ups charge high rates per hour of service. Workers overseas have to work on unearthly hours. Personal transportation needs to be arranged to pick-up and drop employees from their homes.
Electricity is prohibitively expensive in the developing countries. Infrastructure and real estate cost in Tier 1 cities are very high. Management salaries are very high. There is too much duplication of work and management roles. Quality needs to be monitored multiple times and this again leads to duplication.
Economies of developing countries have artificially depreciated their currencies however, high inflation has more than nullified the gains possible through a depreciated currency. The hourly rate that we pay our vendors in Mumbai is around or over ?20(Of-course most of this gets wasted away and do not reach the person engaged in actual production). Now our companies are exploring ties 2 and tier 3 cities to cut cost as the benefits listed earlier above cannot be found anywhere else in the world.
The grouse about unavailability of skilled manpower(and ageing population) in our own economy is the biggest con of recent times. Business Process Outsourcing jobs are fungible jobs and require only ability to read and write. Another convenient alibi given to justify India's case is demographic dividend. Of-course India has the highest ratio of young people found anywhere else in the world. But then it is a splendid opportunity that local governments in India are wasting thanks to present outsourcing and of-shoring boom. End of the day, of-shoring is a zero sum game.
Read about infosys visa scam here: www.firstpost.com/business/us-visa-fraud-infosys-on-tight-leash-others-too-under-scanner-1210881.html
The dark side of call centers!: http://www.rediff.com/money/2005/mar/02guest.htm
What about developments in cognitive computing? Have they been consigned to the waste paper basket?
Not really. They are certainly being pursued(perhaps at a snail pace). However, they aren't being adopted.
Cognitive computing is a process by which computers learn as they do their tasks? and engage with humans like humans. This term was coined by IBM to distinguish it from the more popular term 'artificial intelligence', and to stress the fact that there is nothing artificial about cognitive computing. IBM's Watson is the most advanced cognitive computing platform, but a few others are also being developed, mostly by startups.
Unfortunately IBM itself has a vested interest to keep the progress at bay as the revenue of IBM Global services hinges solely on the outsourcing model.
What about the Government?
Government is looking the other way on account of pressure to generate more jobs.
Isn't it comparable to what we have face in automobiles sector where the strong lobby NOT to switch away from fossil fuel on account of unpredictability of demand from electric motor based or fuel cell technologies?
Such analogies carry a lot of credence.