Video #20 - India: Outsourcing of Jobs
Tuesday, January 10, 2006BACKGROUND INFORMATION
"While it's not something we immediately associate with computing and networks, it's only after companies are automated and connected by a commonly accessible network (the Internet) that they can easily create links between themselves and their suppliers. Work can be passed seamlessly from worker to worker regardless of location"-- David Kirkpatrick, FORTUNE.COM
Where is work performed most efficiently? Outsourcing work to other countries attempts to channel tasks to the most economical location. The idea is to maximize profits for the company. Much business process outsourcing (BPO) is going to countries such as India. Services performed through BPO include benefits administration, billing, payroll, training, logistics, management and human resources functions. In essence, these are activities which themselves do not generate revenues but are necessary to do business.
Rebecca Scholl, senior analyst with Gartner Dataquest (quoted in InfoWeek), says, "Business process outsourcing...is fairly independent of economic cycles. Outsourcing grows in bad times because companies want to cut costs, and it grows in good times because companies want to focus on growth. Globalization, competitive markets, and mergers and acquisitions are the primary stimuli for business-process outsourcing."
The use of outsourcing may lower labor costs as much as 60% according to Ravi Aron, professor at the Wharton School of the University of Pennsylvania. The Indian national software association estimated that services provided in India will rise from $1.46 billion annually to about $17 billion in five years. By then, over a million Indians would be employed in BPO. English-speaking nations such as Jamaica, Malaysia, the Philippines, and Singapore are also named as prospects for this industry. According to Kirkpatrick, "Forrester Research estimates that BPO will cause 3.3 million U.S. jobs to move offshore by 2015. This shift will cause major unemployment for low skilled American workers."
US labor groups protest that in the long run, this trend will erode "the country's technological leadership." As a result, governments have begun to take steps to curtail the trend. Mr. Chai notes that the New Jersey State Senate approved a bill in early 2003 requiring that only citizens or legal residents of the US would be allowed to work on specific state contracts. Additionally, there have been calls to reduce the issuing of overseas H1B and L1 work visas. India's Nasscom (National Association of Software and Services Companies) had this response " The ITES (IT Enabled Services)/BPO market is likely to touch $142bn in 2009, against the current cost of $532bn for these services. The difference of $390bn represents the net saving the US economy can expect from outsourcing. US banks, financial services and insurance companies have saved $6bn to $8bn in the past four years owing to IT outsourcing to India. Helped by these savings, companies have prevented layoffs and instead added 125,000 more jobs."
Despite criticism in the United States, on April 8, 2004, International Business Machines (IBM), the world's largest IT company, announced it had purchased Daksh e-Services, one of India's leading BPO companies. Abraham Thomas, IBM's general manager in India said the investment would: "...leverage local capabilities to extend our leadership position in the business transformation services marketplace."
The trend is likely to cause much conflict between national economies in the near future. However, proponents note that BPO may allow industrialized nations to "share the wealth" with less-developed countries.
SOURCES
Chai, Winston, "Indian outsourcing 'saves US jobs'." CNet Asia, July 14, 2003. http://news.zdnet.co.uk/business/0,39020645,2137521,00.htm
Devraj, Ranjit, "Economy-India: Job Outsourcing Thrives Despite Criticism in U.S." Inter Press Service Wire High Beam Research, April 8, 2004.
Greenemeier, Larry, "Business-Process Outsourcing Grows." Information Week, January 14, 2002. http://www.informationweek.com/story/showArticle.jhtml?articleID=6500704 Kirkpatrick, David, "Finally a productivity payoff from IT?" FORTUNE.COM. CNN.com. http://www.cnn.com/2002/TECH/ptech/12/18/fortune.ff.it.productivity
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.
PURPOSE:
To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Malaysian economy and its significance globally.
OBJECTIVES:
Students will be able to:
- Define business process outsourcing (BPO).
- List the nations benefiting from BPO.
- Describe the growth of BPO in recent years.
- Analyze the positive and negative factors involved in the use of BPO.
- Evaluate the effect of using BPO in the future of the "global village."
MATERIALS:
- Background information provided.
- Resources on business process outsourcing banking available at your school's Media Center and the Public Library System in your area.
- Background information available through Internet "search engines".
- Knowledge.wharton.upenn.edu/100902_ss.html
ACTIVITIES:
May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Research and report on the meaning of BPO: The services provided; who provides them for whom; what are the established trends?
- Create a map illustrating the nations providing services and those using them. Include statistics such as profits for those providing and for those using the services.
- Use charts and graphs to illustrate the growth of BPO services around the world since its inception.
- Create a timeline to show the history of BPO around the world.
- Using the information above, write an editorial expressing and supporting your views on the use of BPO.
- Hold a class debate exposing the pros and cons of BPO.
- Create a written scenario describing the "global village" of 2024 as a result the use of BPO.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
To print this lesson plan:
If your browser does not print frames, try this -- click the right button on your mouse and select "Open Frame In New Window." Then use your browser's print function to print that page. Another option -- choose "Select All" from your browser's pull-down Edit menu. "Copy" the highlighted text and then "Paste" it into any text editor. You can then print it from the text editor.
