Effects of Outsourcing Companies Positions to Low Cost Countries Part 7

Other Countries

India's IT workforce shortage is welcome news in Pakistan, where turnover is less than 10 percent and the average employee wage and benefit package at outsourcing companies is $400 of that, $350 is for wages. The inflationary effects of a tight labour market can be illustrated by the history of the international call centre outsourcing industry in the Philippines. The labour market for call centre company employees in the Manila region is the tightest of any developing country's IT labour market that we know of. The tight labour market has seen our total service costs rise to $12 to $16 per production hour for simple voice services to the U.S. without telecommunications redundancy,

up from $10 to $12 in the Philippines in 2002. Outsourcing agency companies in the Philippines is excellent quality for general customer-service work, but at those prices we can recruit and retain highly trained technical or medical personnel elsewhere in South Asia. Or we can go to South Asian outsourcing companies with onsite American trainers and managers. For $18 an hour we can go to Canada and for $22 an hour we can stay in the U.S.

When the Philippines experienced a modest call centre boom in 2002, it did not appear at that time that the boom was sustainable because when available labour supplies were fully utilized, the labour market would tighten quickly and wages would rise correspondingly.

This dynamic is common in small labour markets. The former British colony of Sri Lanka has many of the advantages of India and Pakistan in terms of English language skills and an emphasis on education. The population of Sri Lanka has a relatively high quality of life but a per capita income of only $930. In comparison, India's per capita income in 2003 was $530. Sri Lanka
The civil war that began in Sri Lanka in 1984 has been winding down and the business climate for emerging or existing outsourcing companies are improving. With a little more pressure exercised on the Colombo government to compromise with the Tamil rebels, long-term peace and stability will be within reach.

A mix of domestic and international IT companies have been cautiously setting up operations in the Colombo area. Rapid tightening of the labour market for customer service personnel will happen in Sri Lanka if the IT industry expands too quickly there. Escape velocity and a tightened labour market could be reached in six to eight months if India implements taxes on U.S. clients of domestic or foreign-owned outsourcing facilities in India.

The average size of new merchant call centres going up in Colombo in 2004 is only around 60 seats to start, expandable out to about 150 to 200 seats. One South Indian firm is setting up operations in Colombo in order to provide redundancy for inbound mission-critical work from its international call centre in Tamil Nadu. It is bringing over technicians and support personnel from India to compensate for a shortage of specialized call centre technicians in Sri Lanka.

Public Policy Recommendations:

Providing Good Data for Policy Analysis: The U.S. government does not presently collect statistical information about the outsourcing of jobs or its impact on employment, technology and capital investment for companies within the United States. The lack of objective data forces policy-makers to rely on speculative projections, and diverts attention from the real task of solving the problems that offshore outsourcing companies creates.

Effects of Outsourcing Companies Positions to Low Cost Countries Part 1...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 2...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 3...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 4...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 5...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 6...Read More
Effects of Outsourcing Companies Positions to Low Cost Countries Part 8...Read More

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