Published on October 23, 2008
Socially Responsible Outsourcing Guiding Principles brought to you by
Summary The $160 billion global services industry has created over 1.5 million jobs These are mostly concentrated in big cities in China, India and the Philippines As a result, over 170 million skilled workers in developing regions such as Africa and rural Asia are left out Unemployment is one of poverty’s greatest ills. Socially responsible outsourcing can help.
The Problem Perception that economically 277% of per-capita income spent depressed regions are open for on tertiary education in some countries aid, not trade + + >175M skilled workers in Africa, Few opportunities for rural India and China smaller ﬁrms to connect to US clients + + 60% unemployment among No socially responsible university and high school graduates option that promotes economic development = = Talent Client Surplus Deﬁcit
One Solution: socially responsible outsourcing Low-income Foreign capital Small ﬁrms Individuals $$$ a small slice of the $160B services poor people with outsourcing industry micro-, small- and untapped talent mid-sized businesses Socially responsible outsourcing promotes economic development and reduces poverty
Socially Responsible Outsourcing: Impact Socially responsible outsourcing creates positive social impact by: Outsourcing jobs in sub-Saharan Africa 1 Ghana directly generating jobs for skilled Senegal workers in low-income regions with Kenya high unemployment levels Uganda 0 1,000 2,000 3,000 4,000 2 1 direct job 2.5 indirect jobs indirectly generating jobs for semi- and unskilled workers 3 reducing skilled-labor emigration, or “brain drain,” in low-income regions
Guiding Principles v1.0 Objective: help low-income and socially disadvantaged people pull themselves out of poverty. Buyers are encouraged to follow any 2 of the 3 principles in choosing a service provider for outsourcing work. Principle Clariﬁcation 1 Includes ﬁrms located in: (a) a developing country, as Hire ﬁrms in poor or very deﬁned by the World Bank*; (b) an economically poor regions distressed region (e.g., Ceara, Brazil; Bihar, India) 2 Hire micro-, small- and mid- Includes ﬁrms that employ between 1 and 249 people sized ﬁrms 3 Hire ﬁrms that are owned “Disadvantaged” means: belonging to an ethnic or by, or employ a majority of, religious minority group, living at or under the poverty disadvantaged people line, physically or mentally disabled *http://www.imf.org/external/pubs/ft/weo/2008/01/pdf/statapp.pdf
What kinds of service providers are included? Principles Example 1 + 2 Daproim Africa, a 10-person Hire ﬁrms in poor Hire micro-, small- digitization company headed by a or very poor and mid-sized ﬁrms person from rural Kenya regions 1 + 3 Digital Divide Data, a nonproﬁt Cambodian data entry ﬁrm that Hire ﬁrms in poor Hire ﬁrms that are or very poor owned by, or employ a employs 500+ socially regions majority of, disadvantaged people disadvantaged people 2 + 3 Preciss International, a 15-person data entry ﬁrm headed by 2 women Hire micro-, small- Hire ﬁrms that are and mid-sized owned by, or employ a Oriak Digital, a 10-person online ﬁrms majority of, research and transcription ﬁrm disadvantaged people headed by a Kenyan woman For case studies, see the following slides.
Case Study: Daproim Africa Location: Nairobi, Kenya • Run by Steve Muthee, a young entrepreneur from rural Kenya • Started in 2006 with 4 people • Types of services: form and survey processing, transcription, digitization, web development • Offers part-time work to local university students and facilities for disabled workers • Plans to grow to 20-30 people • First large project branded as a socially responsible outsourcing ﬁrm: $13K • In pipeline: projects for clients including Benetech, a Bay Area nonproﬁt, and the African Braille Center
Case Study: Digital Divide Data Location: Phnom Penh, Cambodia and Vientiane, Laos • Nonproﬁt social venture led by Harvard graduate Jeremy Hockenstein • Started in Phnom Penh in 2002 with 25 employees • Types of services: form and survey processing, transcription, digitization • Offers education for sex-trafﬁcked women, on-site medical care, scholarship program (ﬁnanced through donations) • Currently employs 500+ people at 3x Cambodian minimum wage • Operationally self-sufﬁcient with revenue from services for clients including the Harvard Crimson
Case Study: Preciss International Location: Nairobi, Kenya • Run by two women, Mugure Mugo and Ivy Kimani • Started in 2002 with 5 employees • Types of services: online research, data processing, subtitling, transcription • Offers part-time work and on-site training to university students, young mothers and recent graduates • Planned growth to 70-80 employees • 30% of revenue goes to ﬂoor employees • In pipeline: projects between $10K and $100K for clients in the US and UK
Case Study: Oriak Digital Location: Nairobi, Kenya View Video >> http://www.youtube.com/watch?v=bjD97YlNhDU
How the guiding principles were developed Samasource spearheaded a series of conversations with many organizations from November 2007 to July 2008 to help develop the “1.0” version of these guidelines. They are only the beginning. In this ﬁrst iteration, we left out several important considerations, such as labor and environmental standards for service providers. It is our hope that these principles evolve into the ﬁrst fair trade system for services. To learn more, please visit www.sourceoutpoverty.org. Organizations consulted Responsible business groups Service Providers + Buyers Academics Industry Consultants
Outsourcing: Quick Facts $120-150B global business process outsourcing market Eastern Europe USA $3.3B $90B China & Southeast Asia $3.1B Latin America & India Caribbean $17B $2.9B Middle East & Africa $425M Source: NASSCOM-McKinsey Study 2005; http://www.indobase.com/bpo/global-market-of-bpo.html
About Mission to create knowledge jobs for skilled, economically disadvantaged people to create business value for US enterprises through low-cost, high-quality business process and IT outsourcing services Method a new socially responsible outsourcing concept among Deﬁning and promoting US enterprises small- and medium-sized outsourcing ﬁrms (SMOs) in Training economically disadvantaged regions Connecting SMOs to a global marketplace for services Measuring the social impact of ethical outsourcing
Appendix 1 2 3 4 5 6 Samasource team Leila Chirayath Joy Sun CEO Initial director Visiting Scholar, Stanford University Director, Clinton Foundation HIV/AIDS Initiative Consultant, Katzenbach Partners Stanford Graduate School of Business (MBA World Bank Development Research Group expected June ’10) BA, Harvard University (African Development Studies) BS, Georgetown University (Foreign Service) Expertise: Outsourcing, social Expertise: Non-proﬁt management and enterprise, development operations, development Alice Wang Henry Thairu Business Development and Finance Kenya Program Advisor Investment Associate, FT Ventures Deputy Vice Chancellor, Jomo Kenyatta Investment Banking Analyst, JP Morgan University of Agriculture and Technology Consultant, UN Industrial Development Chairman, Kenya Council of Science and Tech Organization PhD, Norwegian University of Science and BS, Economics, BS Finance, MIT Technology, Trondheim (Thermodynamics) Expertise: Outsourcing, ﬁnance, and Expertise: Entrepreneurship, business strategy education, technology in Africa Advisory Board Premal Shah Darren Berkowitz President, Kiva Founder & CEO Emeka Okafor Katherine Barr Director, TED Global Partner, Mohr Davidow Ventures Ken Banks Mohamoud Jibrell Developer of Frontline SMS CIO, Ford Foundation