APPENDIX 1
Memorandum by Amicus
1. Amicus is a TUC-affiliated trade union
representing some 1 million workers across a range of industrial
sectors including; manufacturing, not for profit, health IT and
finance. Amicus can be contacted via 33-37 Moreland Street, London,
EC1V 8HA. The following submission will concentrate on aspects
surrounding "Increased competition from low cost economies
using new technologies, highly educated and skilled workforces
and mobile capital". Amicus is extremely concerned regarding
the increasing trend to relocate service sector jobs to low cost
economies. The union has 50,000 members working in the financial
services and 20,000 in IT.
2. There are three key areas that this submission
will deal with.
(i) The employment consequences.
(v) Issues surrounding corporate social
responsibility.
THE EMPLOYMENT
CONSEQUENCES
3. There is no doubt that offshoring threatens
UK service sector jobs. In the financial services alone, (where
figures are available) Deloitte Consulting predict that up to
2 million jobs from western economies could head east by 2008.
This means 200,000 UK finance jobs are at risk. A recent survey
conducted by the CBI reports that 43% of businesses feel under
pressure to export work abroad regardless of whether it is the
right business decision. Call centre and other related industries
utilising ICTs (information communication technologies) have made
a major contribution to the UK's record employment levels and
near full employment. The DTI and the Call Centre Association
have estimated that of all the new jobs created in Britain in
2001, 38% were in call centres. There is no doubt that the Government's
commitment to full employment is under threat. BT, BUPA, National
Rail Enquiries, The Prudential, Royal & Sun Alliance, Lloyds
TSB, Allen Overy, AXA, Powergen, Abbey National, JP Morgan Chase
to name but a few have all announced major offshoring projects
over the last eighteen months. Most recently HSBC announced the
export of 4,000 jobs to India.
3.1 During the 1960s and 70s when the spread
of automation in industrial manufacturing and the emergence of
overseas competition prompted speculation about the future of
work, the service sector was seen as the great hope as it was
assumed that the interaction between producer and consumer could
never witness the same degree of automation as the industrial
sector. We were wrong, in the absence of an identifiable replacement
industry, employment levels are under threat and the lack of a
clear government strategy to address these threats will compound
the problem. This will be particularly pronounced in regions where
Business Processing Operations (BPOs) for example have compensated
for the long-term decline of traditional industries.
THE BUSINESS
CASE
4. There is a tremendous amount of hype
surrounding the case for outsourcing. The cost savings in the
short term are significant to say the least. However, we believe
that too many organisations are making the decisions to offshore
from a simplistic position. More worryingly, many businesses feel
under pressure to do so because their competitors are doing so.
A report from one major consultancy stated "The absence of
a clear offshoring strategy will send an organisations share price
spinning". The business case is more than just labour costs.
Leading call centre experts Bain & Taylor 2003 have recently
completed the most rigorous and objective piece of research on
the Indian call centre industry funded by Scottish Enterprise.
The report entitled "Call centres in Scotland and outsourced
competition from India" indicate some considerable disadvantages
to exporting call centres to India. The following is a brief outline
of their findings. (The executive summary of the report is attached.)
4.1 Outsourcing from the UK is still in
its early stages in reality it is still unclear whether the advantages
of exporting voice services outweigh the disadvantages. There
are difficulties in converting the English speaking resource into
an actual ability to interact with customers for whom English
is their mother tongue. Many applicants fail the hurdles of speech
and accent tests. State governments have had to intervene indicating
the scale of the problem.
4.2 A sizeable minority of organisations
have experienced recruitment difficulties with the shortage of
skilled agents reported as the most significant reason. As the
industry grows these problems will be exacerbated.
4.3 Rates of attrition in India in reality
are similar to those in the UK the average is 25-35% and 50-60%
in particular locations. The cost of recruitment, language training,
cultural training, training to do the job itself will add considerably
to costs in the light of significant attrition. This will be a
considerable and costly problem in the long term. High attrition
may damage the quality of customer service and will be compounded
by language and cultural differences.
4.4 Wages in the Industry are rising and
will continue to rise as competition for skills increases.
4.5 Power cuts are common. The backup supplies
by BPOs, though apparently successful, has considerably increased
infrastructure costs.
4.6 Transporting employees to work presents
huge logistical challenges for employers. At stake is the very
ability of BPOs to operate effectively. Organising free transport
by providing fleets of buses, mini buses and taxis is a further
cost. Logistical difficulties are further compounded by severe
weather conditions.
4.7 The recent rise in communal violence
can not be underestimated when examining whether India has the
political stability to maintain BPO functions in the long term.
The recent nuclear tensions between India and Pakistan against
a backdrop of wider geopolitical tensions need to be noted.
4.8 In the long term it is highly questionable
as to whether India as a destination is the most advantageous
business decision for all service sector organisations particularly
against a backdrop of considerable upheaval in the UK. Despite
the noted disadvantages there has yet to be a balanced and informed
debate to support company decision making. Instead organisations
are being put under tremendous pressure to offshore regardless
of whether it is the right business decision.
SKILLS BASE
5. Amicus believes that offshoring will
have an impact on the UK's skills base. The call centre and business
processing sectors have been responsible for getting many people
back into work. Furthermore, this type of work has provided many
with an introduction to basic and intermediate IT skills. In the
right environment the acquisition of IT skills and customer care
skills can provide an important career ladder. This is particularly
the case for women and returners to work. Offshoring could potentially
remove the initial stepping stones for getting back into work
if these jobs go.
DATA PROTECTION
6. Amicus has concerns regarding the use
of personal data. In the UK consumers are protected by the Data
Protection Act. India does not have adequate data protection legislation.
Although many companies guarantee that the data will be used in
line with UK legislation there are still some serious questions
regarding where that personal data is going, who has access to
the data and who manages it. We believe that there is a necessity
for the Data Protection Commissioner to take a more proactive
role to ensure personnel data exported overseas is effectively
policed.
CORPORATE SOCIAL
RESPONSIBILITY
7. Several issues emerge relating to ethical
practice which the committee needs to consider. Firstly the widespread
practice of third party providers not revealing to customers their
location. A strong ethical case can be made for the right of customers
to be informed. Companies who offshore should provide the customers
with full disclosure.
7.1 Requiring or expecting Indian agents
to adopt westernised names and identities could be seen as manifestations
of neo-colonialism and racism, which may contravene the Race Relations
Act in the UK. If there is nothing to hide, Indian employees who
provide services to UK customers should be free to adopt their
own names and identities.
7.2 Companies who recognise trade unions in
the UK should extend this right to Indian employees. Failing to
do so leaves companies open to the charge of treating Indian workers
inequitably. It is hypocritical to claim that services provided
remotely from India replicate those provided in the UK when a
key element of the employment relationship—trade union recognition—is
not being offered in India.
7.3 India is no exception to the internationally
recognised phenomenon that call centre work and back office work
is stressful and repetitive. Managers of Indian call centres report
that the combination of working at night—six days a week,
10 hours a day—is extremely stressful. Together with hiding
their identities, repetitive work and abusive customers is taking
its toll on agent's health, social and family life. Exhaustion,
withdrawal and burn out is common.
RECOMMENDATIONS
Amicus accepts that globalisation is a reality
of the modern economy and that some economic migration will take
place. As an internationalist organisation we welcome the development
of emerging economies. From a UK perspective we need healthy economies
abroad to buy the goods we produce. But globalisation will fail
if it leads to high unemployment and skills drain in the UK. We
believe that employers must recognise the wider social and economic
impact of their decisions and the Government needs to take a clear
strategic position on this issue.
1. As noted earlier there has yet to be
a comprehensive and balanced debate surrounding the pros and cons
of offshoring. Amicus believes the DTI has a role to play in facilitating
such a debate and providing advice and guidance. This will support
companies in making the right decisions for their business.
2. Offshoring clearly has implications for
employment and the UK skills base. There are many commentators
who suggest that offshoring will allow the UK to compete more
effectively through making cost savings which can be invested
to generate higher skilled jobs. Yet there are no policies in
place to make investments in human capital in order to achieve
the high skilled knowledge economy we aspire to. In the absence
of a clear government policy to deal with offshoring—jobs
and valuable skills will be consigned to the scrap heap. If the
knowledge economy is to develop successfully we need to understand
the impact that offshoring will have on employment. Identify where
our competitive edge lies in the future and how we can nurture
our skills. Then look towards initiating regional programmes through
the RDA's for retraining, skills development and life long learning
to compensate for jobs losses in those areas. Unfortunately, we
have not been given the chance to debate any of these issues at
a government level despite the major threat offshoring presents
to UK employment levels. Amicus believes that the Government should
initiate a debate in partnership with the unions, employers and
other relevant partners to devise a strategy for mitigating against
the effects of offshoring.
3. As noted earlier Amicus has concerns
surrounding corporate social responsibility; we would like the
Government to facilitate social dialogue between the unions, TUC
and the CBI with the aim of drawing up an ethical charter which
would include measures that companies should take at home and
abroad.
4. We believe a strong ethical case can
be made for the customer right to be informed of the location
of the BPO with which they are conducting a business transaction.
Attempts by organisations to deliberately deceive customers, or
to inform customers only under duress are examples of bad industry
practice.
5. UK companies who have migrated their
processes to India should inform customers that their details
may be accesses abroad. Companies should inform their customers
of the measures they have implemented to ensure confidentiality
and how frequently they are reviewed. Furthermore, we believe
that there is a greater role for the Data Protection commissioner
to play in policing the use of personnel data abroad.
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