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  Reading Room:
the economics of outsourcing
 

The euphemism is "back office." The goal is higher profits. The method is outsourcing.

Customers are expensive. They can cost corporations millions by way of service representatives (training, management, salaries, benefits), real estate, and operating expenses. But as General Electric and British Airways and so many other multinationals have discovered, there's an alternative to spending up to two-thirds of a company's resources on "things that have to get done" but have little to do with what makes their business successful. An educated, English-speaking, inexpensive alternative.

Welcome to India. Nearly one-third of its billion citizens speak English, making it the largest English-speaking population outside the United States. There are fifty times more college graduates than in the United Kingdom. Better yet, India made an early and intense investment in its IT industry, producing world-class programmers as well as computer-savvy young people in search of employment with genuine prospects.

Hence the explosion of international call centres, helping American and British customers do everything from rent a car in Las Vegas or purchase their own website to manage grief. In Delhi alone over 200 new call centres have opened since 2000. CNN reports that overall "the $200 million Indian call centre market is expected to have a compound annual growth rate of 40 percent over the next five years to cross $1 billion." In the words of Bangalore website mogul Shriram Ramdas, "India is on its way to being the back office for the world."

And why not? Young Indians seek income and the freedom that comes with it. Most call centres run overnight in India to follow Western business hours—making the job of an operator the only legal way for an Indian woman to work outside the home after dark.
And the multinationals are cleaning up. As the promotional website www.outsourcetoindia.com bluntly puts it, "salaries are dramatically lower than in Europe or the U.S… per agent cost in the USA is approximately $40,000 while in India it is only $5,000." But just to put this figure in perspective: despite the comparatively low wages, in India a call centre operator still makes more than the average doctor.


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