Although many Caribbean countries are looking to offshore outsourcing to rejuvenate their economies, it is not plain sailing. Here are five cautions.
n these tough economic times, when unemployment is high, and traditional sectors are not generating the revenues desired, many Caribbean countries are looking to offshore outsourcing, specifically the call centre and business process outsourcing (BPO) segments, to help to improve their economies. Relative to other industries, such as hospitality and agriculture, an outsourcing firm can launch operations in a few weeks, once the decision is made, and can double or even triple their staff complement in a few months. Hence policymakers frequently tout the industry, as it can result in quick wins in creating jobs, and can be used as a signal to the public (and to other investors) growth in the economy and activity by the ruling government.
However, all of the excitement around growing call centres and BPO in the Caribbean is overshadowing a number of sobering considerations. Five are outlined below. Whilst it may not mean that countries should abandon their focus on that sector, a more careful strategy may be necessary to manage those challenges.
1. Costs still matter
One of the greatest inducements for firms to outsource parts of their operation is the cost savings they are likely to incur when they do so. This focus on lower cost was the impetus behind offshore outsourcing, and the emergence of countries, such as India, China and the Philippines, as top locations. Recently, experts have been suggesting that costs are no longer the key deciding factor when firms decide to outsource. Instead, the focus is on the expertise, efficiencies and service improvements that can result when third party service providers are used.
However, while client firms might now be more aware of the fact that outsourcing parts of their operations allows them to focus on their core business, whilst not compromising on the quality of the operations they have devolved, cost is still a factor. The business model has to work for the outsourcing firm, which will allow them to cover all of their costs of operations and turn a profit at the price point that is palatable to both them and their clients. Most Caribbean countries are not necessarily seen as “low-cost countries”. With limited and premium value real estate, relatively high per capital Gross National Income and Gross Domestic, to name a few, these can make the numbers (in business models) unworkable and less likely to result in investment.
2. Our relatively small population size scares away prospective investors
Another important deciding factor in the site selection process for an outsourcing location is the extent to which a provider can grow in that particular location. Although a firm might start small, with only 10 seats for example, typically, they grow to at least 100 seats, as it is usually only when they ramp up their operations that they truly become profitable.
The top outsourcing firms global have tens, and even hundreds, of thousands of employees worldwide, and frequently have at least 500 employees in any one location. Hence, many firms will not even bother to consider most Caribbean/CARICOM countries, as we may not have the population sizes that will allow them to scale their operations to sizes that will make the effort and the investment worthwhile. More
eCommerce4 months ago