“Even if I don’t have an iPhone, I can still have a world market for my work.”

Wilfred Mworia, a 22 year-old student in Nairobi and winner of Samasource’s Facebook Developer Challenge in April, discussed Kenya’s growing technology community in a New York Times article over the weekend. The piece covers Google’s activities in Kenya and highlights Skunkworks, a local community of software developers:

The distinctive digital experience in Nairobi inspires confidence in its youthful community of programmers, bloggers and Web enthusiasts. Over the past year, about 600 people in Nairobi — most under 25 — have coalesced into a group called Skunk Works, sharing ideas and encouraging new businesses. In June, it held an all-day workshop that included sessions on using the Android phone operating system from Google, developing applications for digital maps and creating content for mobile phones.

The idea that Nairobi-based talent can fuel the demand for software engineers in more developed markets is a powerful one. And there’s plenty of evidence that groups of coders are forming around the continent– on Facebook, hundreds of people have joined groups like Ghana Coders, Ghana Software Developers, and the Nigerian Association of Computer Science Students. We’ve even been in touch with a Rwandan software development shop called Kigali Coders, making waves on Rentacoder.

Flat worlders take note: as the cost of bandwidth declines over the next decade, the people who write the code that powers some of our favorite applications may well be from Africa.

The Outsourcing Industry and CSR

The International Association of Outsourcing Professionals, based in New York, counts major business process and IT outsourcing industry leaders and consultants in its membership. So when the IAOP posted a news item on “socially responsible outsourcing,” I took notice. According to the article’s author, Jagdish Dalal, “the most obvious impact of socially responsible outsourcing is on how labor is treated.”

Labor standards are obviously a critical part of any definition of socially responsible outsourcing. But in a knowledge industry such as BPO/IT, labor standards are probably not as much of a problem as the geographic distribution of outsourcing work. Why?

1. Service industries rely on human capital as a primary asset. Keeping workers happy is an essential aspect of client service — unhappy workers don’t answer calls or perform other client-facing activities well. This is markedly different from manufacturing, where horrendous labor conditions (of the sort documented by writer John Bowe) can persist because workers are found at the very bottom of the supply chain, far from the eyes and ears of end consumers.

2. Attrition is extremely costly in the outsourcing business. In India, where some firms face annual attrition of over 60%, discontinuity arising from the constant need to train new workers is a major obstacle to building long term relationships with US clients. Thanks to increasing demand for outsourcing workers in India, wages are on the rise — even a tiny pay increase can be enough to encourage a worker to switch jobs. In a market like this, exploitive labor practices aren’t common.

3. Knowledge workers tend to know their rights. There’s no question that BPO and IT jobs, given the hours and nature of the work, can take a toll on workers’ emotional and physical health. However, these workers tend to be high-school or college-educated, which means they’re less likely to be exploited than uneducated, illiterate laborers in other industries.

Any successful outsourcing firm has already endogenized good labor practices in its business model. And newcomers won’t last long if they don’t follow suit.

The real key to CSR in the outsourcing world isn’t about labor practices — rather, it’s about ensuring that some of the jobs migrating overseas from the West go to skilled, economically disadvantaged people in very poor countries and regions. The vast majority of jobs go to established locales in big cities in places like India and China. Sending a small percentage of this work to rural Asia or Africa could make enormous social impact in these regions. For such a system to work, we need to establish criteria for economic disadvantage, encourage organizations like the IAOP to buy in, and help US companies understand the business case for diversifying their outsourcing portfolio.

As always, comments/thoughts welcome!

Africa: The Next Asia for Outsourcing?

I recently spoke at an IPN event focused on examining parallels between Africa and Asia from a business, technology and enterprise perspective. Some of the panelists (including Aleem Waiji of Google and Joseph Nganga, an energy consultant) noted that Africa needs its own, locally-generated solutions that are appropriate to the region’s context.

This brings some interesting perspective to outsourcing models currently being tested in Africa. Many African firms get started by sub-contracting from Asia, rather than dealing directly with US clients. In the past, I’ve discouraged this — generally, prices are very low, and it’s tough to keep clients happy when you can’t engage with them directly.

The fact that they settle for these terms, however, indicates that there are some major structural problems at play that don’t affect Indian firms. African companies have unique needs that aren’t met by existing channels for finding work, negotiating contracts, and getting paid. Samasource is working on some parts of this problem, but there’s a huge need for more players in this space.

Good Work and the Mechanical Turk

I recently read Good Work, a collection of economist/philosopher E. F. Schumacher’s musings on meaningful job creation and appropriate technology for the world’s poor. Schumacher’s ideas were revolutionary for the 1970s — he was one of few development thinkers to argue that economic growth shouldn’t come at the expense of fulfilling work. The book’s prologue quotes Camus: “Without work, all life goes rotten, but when work is soulless, life stifles and dies.”

Over at Samasource, we’ve been following the development of Amazon’s Mechanical Turk closely. The Turk, which derives its name from a 19th century chess-playing machine that was secretly powered by a human, helps engineers find people to complete rote “human intelligence tasks” (HITs) such as photo tagging to complement work done by computers. HITs are completed for as little as $0.02 each by people in over 100 countries. When it launched, Amazon was widely criticized for providing a “virtual sweatshop” platform to US-based companies — the primary unit of labor on the site is a task (rather than an hour, or a project), so posters needn’t worry about minimum wage laws, overtime, health insurance, or other policies designed to protect workers.

However, a brief perusal through one of several forums devoted to “Turkers” shows that worker perceptions of the platform, at least here in the US, aren’t so negative. Some use the Turk to earn money while procrastinating, while others have been paid to participate in creative projects, such as the much-publicized Sheep Market art installation designed by Aaron Koblin. People I’ve spoken to in the business process outsourcing industry, which often engages humans to perform routine tasks requiring little creativity, think the Turk might be a more efficient, flexible way to distribute work across a pool of willing workers.

What does all this mean for companies that aim to create “good work” for their employees? Some outsourcing firms compensate lower-level employees for performing monotonous tasks by providing good recreational facilities, benefits, and training programs designed to help them transition into other careers (Digital Divide Data, a data entry firm based in Cambodia, is a fine example). This is costlier than simply parsing out work in a system like the Turk; people aren’t fungible resources, whereas tasks are, and fungibility seems to make things cheaper.

Right now, it seems like most Turk work is fairly low-level — for a while, at least, business process outsourcing companies that handle high-value services like integrated digitization or customer support won’t be threatened by task-oriented marketplaces focused on highly distributed data projects. But in the long term, what might Turk-style automation do to companies trying to create meaningful jobs for people?

Thoughts welcome.

Rural BPO Drishtee featured on CNN

One of Samasource’s vendors, rural outsourcing company Drishtee, was featured recently on CNN IBN (CNN’s sister organization in India). Drishtee’s model is intriguing – by linking villages across India in a distributed network, the company can tap thousands of skilled rural workers to scale client projects rapidly. If your enterprise has data entry, transcription, or text conversion needs, please write to info <at> samasource.org to find out if Drishtee would be a good fit for you.

 

Opportunities in outsourcing ripe for SMEs

As corporate competition rises companies are constantly looking for solutions to increase efficiency at manageable costs. Several companies have discovered that outsourcing certain operations of their business has provided these solutions and allowed them to leverage their competitive edge. The idea behind it is to outsource secondary operations that are not core skill areas of your company. This effectively allows your staff to focus on key, income generating areas of operations. Of course there are costs of outsourcing the secondary services, but they can be significantly offset by revenues generated from your staff spending more time on primary services.

Typically big companies have been able to take advantage of outsourcing and maximize their economies of scale. Safaricom recently joined the club with intentions to outsource their call center, which has been a weakness in servicing a rapidly growing clientele. However, it’s not just the big companies, small and medium enterprises (SMEs) can also benefit from outsourcing.

In fact, AccessKenya has just announced their venture into outsourcing services for SMEs with plans to offer them similar opportunities to enhance operations. This is good news for SMEs in Kenya, as AccessKenya have proven their customer satisfaction, riding on a strong annual performance of Sh600 million in retained earnings and Sh127 million in profits. AccessKenya will offer a range of OutsourcingIT services including network server and backup support, email maintenance and antiviral management.[1]

With major players such as Safaricom and AccesKenya entering into Kenya’s BPO sector, other companies are bound to join. The Kenyan government is also committed to boost these types of ICT developments in efforts to facilitate economic growth. In fact, the government could soon become a major BPO client itself by outsourcing services for its e-Government project.[2] As BPO opportunities continue to emerge domestically, companies in Kenya may not have to look to far for clients or services.

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[1] Daily Nation, Philip Wahome, Business pg 28, February 29, 2008.

[2] The Financial Standard, Jonathan Somen, February 26, 2008

Kenya’s Quest for Fiber

From Sam Imende, Samasource’s program manager in Nairobi:

Kenyans are eagerly anticipating the construction of two major fiber optic cable lines that will greatly enhance internet services and significantly cut down the costs of telecommunications in the region. The current copper cables and satellite systems in Kenya have put ICT based companies at a major disadvantage in global ICT services. Most of the systems are routed through Europe, which is both costly and highly inefficient. A comparison revealed that in South Africa one megabyte of bandwidth cost $300 (Sh21,000) while in Kenya, the cheapest dedicated one megabyte of bandwidth costs $4,000 (Sh280,000).

To offset this cost disadvantage in the business process outsourcing (BPO) sector the Kenyan government has allocated $9mil (Sh630 mil), administered by the Kenya ICT board, to subsidize companies that qualify for assistance. The subsidy will cover the difference between current costs of bandwidth and costs anticipated under a fibre optic network. This is a strong incentive for companies looking to venture into the BPO sector and already half of the existing BPO firms in Kenya have applied for the subsidy. Tax-payers will bear the burden of this subsidy while constructions of the fibre optic lines are underway.

One of the lines, East African Submarine Cable System (EASSy), was expected to be completed by now, but was held up when Kenya pulled out of the project over a disagreement with South Africa on management. However the Franco-US firm Alcatel- Lucent picked up the EASSy contract in March 2007 to develop the first ever optical subsea cable link that will run all the way from South Africa to Sudan. Alcatel-Lucent also won the $82mil to construct a separate cable between Mombasa, Kenya and Fujairah, United Arab Emirates (UAE). The Kenyan government plans to allocate $50mil to upgrade the telecommunication networks by constructing domestic fiber optic networks in preparation of the two cables. These fiber optic networks are expected to reduce bandwith costs by up to 60%.

Kenya’s post-election crisis has taken its toll on the economy and may have delayed construction of the fiber optic projects. It is however prudent, that as the situation stabilizes, the Kenyan government makes it a priority to facilitate the construction of these two fiber optic networks that will offer widespread benefits to Kenyans through cheaper, faster and more efficient ICT services.

Thomas Friedman on I.T. and E.T. in Rural India

Tom Friedman wrote about the growing rural BPO trend in India last year after traveling to Ethakota, a small village east of Hyderabad where Satyam Computer Services, one of India’s outsourcing giants, set up a data center. In a New York Times Op-Ed, Friedman describes the challenge of setting up shop in areas with unreliable access to electricity (only 85% of India’s villages are wired, according to the most generous estimates) — one telemedicine center he visited was powered with car batteries.

Friedman seems to think that despite these infrastructural hurdles, rural BPO seems promising. For one thing, knowledge workers aren’t forced to leave their families back home to find work increasingly cramped urban centers:

Suresh Varma, 30, one of the data managers, was working for a U.S. oil company in Hyderabad and actually decided to move back to the village where his parents came from. “I have a much higher quality of life here than in an urban area anywhere in India,” he said. “The city is concrete. You spend most of your time in traffic, just getting from one place to another. Here you walk to work. Here I am in touch with what is happening in the cities, but at the same time I don’t miss out on my professional aspirations. … It is like moving from a Silicon Valley to a real valley.”

As outsourcing workers in India’s offshore hubs become increasingly frustrated at the poor lifestyle their jobs impose, the value proposition of rural BPO work for young professionals may be on the rise. This may also be true for firms like Satyam –  employee attrition, a major cost center for most firms in this industry, tends to be lower in areas where outsourcing jobs hold more prestige.

Unlike in the city, where outsourcing workers come and go, “in the village, nobody gives up these jobs,” said Verghese Jacob, who heads the Byrraju Foundation, which plans to gradually hand over ownership of the data centers to the villagers. “They are very innovative and positive, and because some of them had never worked on a computer before, their respect for the opportunity is so much more than for a city child who takes it for granted.”

Could the same be true for the relative prestige of such jobs in areas where outsourcing is yet to take off, such as most of Africa?

The Green IT Revolution

Gartner, a Stamford-based consulting firm, recently named “green IT” as one of the ten forces that will shape business and information technology in 2008. Survey data seems to support this — according to Forrester Research, as of October, 38% of IT professionals said their companies use environmental criteria in their evaluation and selection of IT equipment, up from 25% six months ago.

SearchCIO.com recently posted a good summary of the green IT trend. Thoughts welcome.

“Wily Brokers” Hurt Kenyan Outsourcing Firms

Brokers have cost some of East Africa’s top outsourcing firms tens of thousands of dollars in finder’s fees that led nowhere. A recent article in Business Daily Africa reports that many local firms are forced to use middlemen to find work, since foreign business development is prohibitively expensive. Often based abroad, middlemen dictate contract terms under local legal jurisdictions, making it impossible for firms to recoup fees. For small outsourcing companies in Kenya, these fees aren’t trivial:

 …two of the leading call centres in the country, KenCall and Skyweb Evans,  say they have fallen prey to wily brokers who target new entrants in the sector.

KenCall EPZ Chief Executive Officer Nick Nesbitt says his firm lost between $200,000 to $300,000 over three years to a number of brokers from India and United States three years ago when he started the business.

“During this period the amount meant a lot to my company. We could not afford to pay salaries and our growth slowed,” said Nesbitt.

Comments welcome — thanks to Chris at Globefinity.net for the story.