Impact outsourcing

Dr Thomas Tang explores the role and opportunities for impact outsourcing, particularly for information technology (IT) functions, to build responsible growth.

The digital age is upon us. But for almost 3 billion people in the world who exist on less than US$1.90 a day – the World Bank’s widely held definition of extreme poverty – the advantages of IT are mostly unrealised. This is often referred to as the “digital divide” or the shortage of means to reach communities who do not possess the literacy or motivation to use technology. Impact outsourcing or socially responsible outsourcing was first coined by Brian Nicholson in 2011 in a paper entitled “How to improve IT outsourcing relationships while doing good for society”. In this, arguments were made (which have since been reiterated) that underprivileged communities would benefit in the digital world if they were given the right roles and empowered accordingly. Hence, outsourcing of certain IT services to those living in poverty helps to create jobs and serves as an entry point into the formal economy, which leads to valuable job experience that can enable workers to pay their way through school, receive higher education and develop careers. Many see impact outsourcing as an effective market-based solution to poverty alleviation.

Lending strength to a nation’s growth

Impact outsourcing in particular benefits developing nations. For instance, India’s Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO) sectors contributed 6% to GDP (Gross Domestic Product) in 2018. With these growing sectors, traditional outsourcing service providers are continuously seeking out alternate lower-cost destinations – and rural towns offer pools of new and more affordable workers. The business model, furthermore, is compelling. iMerit, a computing company that does what it calls “global smartsourcing”, trains and employs rural youth and women capitalising on the demand for skills in social media, mobile analytics, cloud technology and e-commerce. The key to success is scale, i.e., a large number of people to work with a large amount of data. For iMerit, the goal is to create a digital workforce of young men and women who are inspired to rise out of poverty. By finding partner companies in places like Silicon Valley, who are interested in outsourcing work on sensitive data to specialists trained in data confidentiality standards, there is a win-win model to be had. iMerit is not alone; other impact outsourcing service providers like Digital Divide Data and Samasource work with businesses to decrease their costs and increase their social impact through socially responsible outsourcing. Impact outsourcing in countries like India, though, is still considered to be in its early stage of development with a market estimated at US$4.5 billion, which represents about 4% of the US$119 billion BPO industry. Some estimate that impact outsourcing has the potential to grow to more than US$20 billion by 2020, employing almost a million socio-economically disadvantaged people.

If they wish to have a sustainable future, companies cannot devolve social responsibility

Tackling challenges

But this sector is not without its challenges. In order to bridge the gap between poverty and digital employment, organisations have to tackle barriers from lack of Internet connectivity to gender discrimination. However, with mounting interest in this area, there is a significant opportunity for socially-minded companies to leverage their investment in one area to help achieve broader development goals. The ultimate aim is to open up opportunities for a wider range of disenfranchised people and communities in dynamic economic sectors like data management instead of the ones that keep them in poverty, such as manual labour. Like most emerging sector opportunities, there are inherent problems in ensuring fair treatment of workers, quality control and the potential for exploitation. To circumvent these issues, companies are pursuing the following measures.

Basic compliance with international labour laws is the first step. Impact outsourcing should not be treated any differently to other businesses, and employers are expected to behave with integrity and workers are protected from rights violations or other harmful practices.
Worker protection should be further enabled through collective strength. Labor Link is an e-platform that connects millions of workers and polls them in real time about their needs and then connects them with local service providers.
Codes of practice and standards are important to maintain quality of data processing together with transparency in industry monitoring and compliance.
If the outsourced jobs go abroad, resentment may arise from those who have lost local jobs. This must be carefully managed – especially if foreign workers receive low salaries, a business must confront the perception that it is exploiting the powerless poor for financial gain.

Lastly, automation of jobs – which may have led to outsourcing in the first place – is going to be something companies must deal with. With developments in Artificial Intelligence (AI), the signs indicate that there will be less and less need for human involvement and outsourcing may eventually disappear altogether. This sounds plausible but for many reasons it is not likely to happen. Firstly, machines cannot replace the human interface; sentiment and empathy are still prerequisites for doing business. Secondly, computers still rely on humans for programming. This means that upskilling of not just the poor but all industry workers should not be one-dimensional but should be versatile enough to apply computer literacy to a range of jobs in the future. Lastly, from a long-term view, businesses must play a role to use market power to drive social change. If they wish to have a sustainable future, companies cannot devolve social responsibility. That is why the prospects for impact outsourcing are bright.

This article was originally published in The Fourth Leap, August – September 2019.