Foreign Outsourcing Expected to Grow, but Tough Issues Abound

As outsourcing technology jobs overseas becomes more widespread, businesses are learning they have to be sensitive to their customers’ concerns as well as their bottom line.

U.S. companies are becoming increasingly reliant upon contractors in cheaper labor markets abroad to handle customer service calls, programming, processing of forms and other tasks. But companies are also finding that customers sometimes balk at talking to a customer service representative on another continent. Labor groups and others complain about jobs going overseas that should remain at home.

Complaints recently prompted computer maker Dell to route service calls for its large business customers back to the United States from Bangalore, India, the New York Times reported. Important business customers told Dell that Indian technical support workers appeared to be giving scripted answers and couldn’t handle complex questions.

And in the state of Indiana, where a firm in India was hired to process unemployment benefits, the state senate is investigating whether foreign workers took jobs away from workers in the state. The contract was terminated.

According to InformationWeek, what particularly enraged some opponents of the contract was the fact that the foreign firm was hired to process Indiana workers' unemployment claims — claims that could be coming from workers who lost jobs due to the hiring of foreign workers.

India is particularly popular for outsourced business. Reuters reported that the business process outsourcing services market in India will be worth $13.8 billion, or 49 percent of the global offshore market, by 2007, according to estimates by the consultancy firm Gartner.

In addition, a new survey by market research company IDC revealed that nearly a quarter of information technology services will be sent offshore by 2007, the New York Times reported. That’s up from 5 percent this year.

While it appears as if outsourcing is only going to grow, concerns are bound to increase as well.

For example, the Texas Society of CPAs has raised concerns about the “potential dangers” of outsourcing. They include the loss of security of client information sent electronically, the privacy of personal and financial information of clients, and the potential loss of control of data and information when sent anywhere outside the firm.

Experts in India acknowledge that privacy and security issues must be dealt with in order for outsourcing to continue its explosive growth.

"As more data flows in and outsourcing moves up the value chain, Indian firms will need to show they can meet the standards required by American and European firms," Sanjeev Adlakha, an associate at P&A Law Offices, told Reuters at a venture capital seminar in Mumbai. "It hasn't been an issue so far, but in the absence of data protection legislation at our end, it will be a complex matter to structure higher-end deals," Adlakha added.

Companies are also addressing customers who are surprised to be talking to someone who is thousands of miles away, not only in distance but in culture.

Many offshore call centers are starting to teach workers about American customs, according to the New York Times. In Bangalore, for example, customer service representatives are being instructed to watch reruns of "Friends," read American newspapers and magazines, and learn about American consumer habits.

Then again, some people don’t care who they talk to, as long as that person is qualified. "Most of the time, they're just happy to be talking to a human," said John Parkinson, chief technologist for the Americas region at Cap Gemini Ernst & Young, a consulting business. "The vast majority of people are indifferent to whether it's an American if they're getting good service."

You may like these other stories...

By Jason BramwellThe IRS on August 19 unveiled a new online registration system for financial institutions that need to register with the agency under the Foreign Account Tax Compliance Act (FATCA).Financial institutions...
By Curtis C. Verschoor, CMAThe furor over the extensive tax avoidance measures used by technology companies such as Google and Apple has reached new heights in both the United Kingdom and the United States. Government...
By Jason Bramwell Government leaders of eight of the world's largest economies pledged on June 18 to take a tougher stance on fighting tax evasion. The Group of Eight (G8) leaders, who met in Northern Ireland,...

Already a member? log in here.

Upcoming CPE Webinars

Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 22This webinar will include discussions of important issues in AU-C 800, Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30Many Excel users have a love-hate relationship with workbook links.