Yesterday was the start of the National Outsourcing Association annual sourcing summit – it continues in London today.

I was chairing a session that included an examination of the economic benefits of offshoring. Ian Brinkley, Knowledge Economy Programme Director of The Work Foundation, and Peter Skyte, National Officer of the trade union Unite, were both speaking. They each gave a position statement for a few minutes followed by a debate.

What I noticed immediately was that Ian focused entirely on traditional economic indicators, GDP, exports, and imports… that kind of thing. And his information was all correct and valid, in particular he reminded the audience that the UK exports more knowledge services than it imports, and service imports from India are actually a tiny percentage of all service imports.

Ian had some useful data, reminding the audience that the general fear of offshoring usually overplays the size of the issue. But Peter took a different approach and talked about the political, cultural, and social changes associated with offshoring. He was concerned about structural unemployment in the UK and enforced changes to society in places such as India.

Neither was rejecting the value of offshore outsourcing, but they had very interesting and different approaches to examining the value of international service exports.

After the talk, I met someone I know at Cognizant and he said that my own blogging on offshoring has become very negative in recent months. I was surprised. As we spoke he elaborated on what I had been writing in earlier blogs and I think that his complaint is that I have been writing more from Peter’s view, rather than Ian’s.

Rest assured, I’m generally in favour of working internationally and finding expertise wherever it exists using strategies such as offshoring. But I also agree with Peter – there are longer-term consequences we should be thinking about because the development of hi-tech international services is still in its infancy.

The societal changes we are seeing go far deeper than just economic gain and it’s not being negative to suggest we explore further.


 

A Philippines business forum took place in London yesterday, where the Philippines ambassador to the UK opened procedings by handing me a certificate of appreciation because the National Outsourcing Association here in the UK awarded the Philippines the "Offshoring destination of the year" award last month.

Peter Beckingham, former British ambassador to the Philippines, then opened the discussion by talking a little about some of his experience working with British companies in the Philippines. In fact, he only just left the Philippines three months ago so his knowledge remains quite current.

Beckingham started by saying: “Why are a lot of British companies investing in the Philippines? It’s the cost factor. It’s comparable to China and Vietnam, and probably India too. And particularly for call centre work, the Filipino aptitude for English is second to none. Sometimes there is an issue finding enough people, but the way in which Filipinos answer questions is exactly what the European market appreciates.”

It’s interesting that his first observation is on the cost of operating in the Philippines, and now Manila itself has become the largest business process outsourcing (BPO) centre in the world. With a quarter of a million workers all focused each day on BPO, there is a lot of support for the industry.

Beckingham went on to say: “Finally, and most fundamentally, there is the quality of the workforce. This applies widely, not just in outsourcing. Managers I have worked with in the past (and who have also left the Philippines) said to me that they felt enormously privileged to work with the people in Manila, as they are better than many of the people they have worked with in other locations.”
Beckingham is talking as an independent observer, but clearly if the Filipinos wanted him to be more "on message" I guess he might have reversed his statements.

Greg Russell, Senior Vice President Asia of Australian Telco Telstra, gave some real-life examples of why his firm has started working with people in the Philippines. One of the comments that really stood out was over collections – chasing people who don’t pay their phone bill. He mentioned that the success rate for collections was quite poor when managed locally by Australians, but when they used people in the Philippines it increased four times. That’s not just extra cash in the bank; it’s also maintaining a relationship with the customer by helping them to pay the bill, rather than chasing them until they avoid any relationship with the company. It was an interesting example and did demonstrate less of an emphasis on the low cost resource.

Oscar Sañez, CEO of the Business Processing Association of the Philippines, then delivered a talk focused on the benefits of working with the Philippines.

And there is a really strong case there, as I’ve written before. Nearly half a million students graduate every year in the Philippines and there is a huge skew towards business, technology, and accounting degrees. Only 7,000 people study anything in the humanities, so you can see how the student body observes where their future jobs are located.

Apart from the usual talk on how great things are in the Philippines, Sañez gave some interesting information on niche areas such as animation. A lot of Japanese anime is now produced in the Philippines and American animators such as Hanna Barbera have been working there for a couple of decades now.

The prospects for growth have all been reviewed because of the global economic slowdown, but even the present revisions show an expectation that the market for outsourcing hi-tech services will almost double between now and 2011.

Considering what’s happened on major outsourcing markets, like India for example, that’s incredibly strong and a very positive prediction for the Philippines. Let’s hope they make it happen.

I noticed a US newspaper in Kansas reporting on expat observations from China - kind of like advice from the expat dim sum café to president Obama.

It was interesting to observe from the newspaper column, that the expat Americans in China see constant cultural issues. They can’t get used to the traffic, or the people spitting in the street, but once there they do finally realise that there are 1.3 billion Chinese people – all potential consumers of American products.

The negative debate over outsourcing normally focuses on the displacement of people in wealthy western nations. The issue is usually that they need to find new jobs because someone in a lower-cost economy has taken that job.

What’s worth remembering is that places like India and China are also huge potential markets. The article describes an American working for Ford's offshore team in China who comes to the realisation that Ford is not destroying jobs in the US, but is actually exploring new markets around the world.

It’s a subtle observation, but worth repeating. We don’t talk very often of the flat world these days, but as the old world looks to recover from the economic collapse of the past two years, it will look more and more to the new world for growth.