Pakistan: Better Late Than Never In Outsourcing

Think software and services outsourcing, and places like Bangalore, Manila, and perhaps Budapest spring to mind. But Lahore or Karachi? The Pakistani cities might not be on the outsourcing map yet, but the country's software shops are out to change that. "As a natural course, American companies would not look at Pakistan," acknowledges Jehan Ara, president of the 250-member Pakistan Software Houses Assn. "So we have to get them to look at us, and once they do business with us and credibility is established, they come back for more."
It makes sense for Pakistan to follow in India's footsteps and try to boost its outsourcing business. The country, after all, shares India's British colonial history and has some 17 million English speakers. It has a huge community of émigrés with experience in technology. And like India, it has a culture that values education and hard work. Wages, meanwhile, stand at about the same level as in India, with call center workers earning about $12 per day and starting software engineers pulling in $5,000 or so annually.

Still, Pakistan remains far behind India. Last year the country's software and IT services business hit just $300 million, and exports made up only about 11% of that. India, by contrast, booked $12.8 billion in software and services exports in 2004. But the Pakistan Software Export Board, a federal body set up to promote outsourcing, forecasts that the business will grow by at least 45% annually in coming years. "Pakistan started late but now is catching up very fast in software development," says Prime Minister Shaukat Aziz.
Lower-level operations such as call centers are expected to grow even faster: Some 120 centers have opened in Pakistan in the past two years. Today they employ 3,500 people, and that number is expected to grow by 60% a year. Arwen Tech, a Karachi company that runs a 600-seat center, saw its sales double last year, to $10 million, serving clients such as Pakistan International Airlines and the local franchisee for KFC Corp. (YUM! ). Now the company is building a 1,500-seat facility and hopes to boost revenues tenfold, to $100 million, in the next five years as it attracts more international clients.

Pakistan could use the boost that outsourcing provides. Unemployment is officially pegged at 8%, although in reality it's far higher than that, and the government is looking for ways to fuel economic growth. Pakistan needs technology to increase efficiency and productivity. And software exports will help the country move away from its reliance on textiles, which make up 65% of total exports.
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Outsourcing

Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. Outsourcing is a business decision that is often made to lower costs or focus on core competences. A related term, offshoring, means transferring work to another country, typically overseas. Offshoring is similar to outsourcing when companies hire overseas subcontractors, but differs when companies transfer work to the same company in another country. Outsourcing became a popular buzzword in business and management in the 1990s. EDS was the first company to establish the outsourcing business.

Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider.

Outsourcing and/or out-tasking involve transferring a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust.

Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Many companies look to employ expert organizations in the areas targeted for outsourcing. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Outsourcing business is characterized by expertise not inherent to the core of the client organization.

The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service.

Due to this demand call centers have sprung up in Canada, China, Eastern Europe, Israel, Ireland, Pakistan, Philippines and even the Caribbean. Many companies, most notably Dell and AT&T Wireless, have gained significant negative publicity for their decisions to use non-US labor for customer service and technical support; one of the most prominent complaints being the expectation that the replacement staff will have more trouble communicating with customers.

A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business.

The term "outsourcing" became more well known largely because of a growth in the number of high-tech companies in the early 1990s that were often not large enough to be able to easily maintain large customer service departments of their own. In some cases these companies hired technical writers to simplify the usage instructions of their products, index the key points of information and contracted with temporary employment agencies to find, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls. These agents generally worked in call centers where the information needed to assist the calling customer was indexed in a computer system. The agents were often not able to tell the customer they did not actually directly work for the original manufacturer. In some cases, the agents are not allowed to even give out their real name.