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Silicon Valley BizInk spoke to APARC Senior Research Scholar %people1% about his current hot-button work on the offshoring of business practices (BPO) to India.

U.S. companies sent jobs to India to save money, but stayed because of the quality of the work. Rafiq Dossani is a senior research scholar at the Asia-Pacific Research Center at Stanford University. Dossani, along with Martin Kenney, a professor in the human and community development department at the University of California, Davis, published a 52-page research report entitled "Went for Cost, Stayed for Quality: Moving the Back Office to India." The paper is available for download below. The research is a comprehensive look at the driving forces behind the migration of "business process" work to India. These BP jobs include much of the so-called back-office tasks -- human resources, accounting and customer service -- that are being outsourced to India. General Electric Co., for example, employs 9,000 BP workers in India, saving the company $340 million per year. It's little wonder why GE anticipates employing 20,000 workers in India by next year. Biz Ink editor Dennis Taylor spoke with Dossani from his Stanford University office about the dynamics of the offshoring trend. Q: What are the key business needs being outsourced to India today? A: There are really two practices: [information technology] and business process outsourcing. BP is expected to overtake IT by next year. IT outsourcing has been growing in India by about 15 percent per year. BP is growing at 100 percent a year. There are different dynamics involved. Q: On the IT side, what work is being done in India? A: There are four distinct processes to IT development -- project determination, architecture, system design and [programming]. About 25 percent of that is programming, quality assurance and Web services. India has about 15 percent of that. It's a small percentage, but it's growing fast. Q: Why does that type of technology flourish in India? Is it the education focus? A: The education policy as such hasn't made much of a difference. India doesn't have a lot of technically educated people, relative to its population. There are 0.3 scientists and technicians per 1,000 people, which ranks India 42 out of 62 nations surveyed by the World Bank in 1998 in the per-capita number of scientists and technicians. What it does have is a billion people. What has helped India is everyone speaks English. Q: What was the most surprising finding coming out of your research? A: By far, India's biggest skill is business management. It is very hard to manage these projects remotely. Yet American companies are lifting a key component of a process and shipping it off to India and it is being managed well. You need to understand that 96 percent of these programming projects are complex coding for banks, insurance companies and a host of manufacturing companies. This is complex software being created on demand and most of it -- because it's banks and manufacturing [not tech companies] -- is coming from mainstream America, not Silicon Valley. Q: How much of the work being outsourced to India comes from the United States? A: About 70 percent. How is the phenomenon of "offshoring" affected life in tech hubs such as Bangalore? Q: In a sense IT has not had an impact on these places. It's like an ivory tower. In March 2003, there were 230,000 employed in the [IT] industry. In Bangalore that may represent one-third of the population, but 30,000 out of a population of 5 million creates a buzz, but that's about it. A: But BP outsourcing is having a completely different impact. There are many recent graduates who have never been able to get a job so easily. Now they have well-paid jobs with multinational firms because they speak English and have good interactive skills. With more people employed, it's beginning to hit mainstream India and move out of Bangalore and to smaller cities. That in turn affects other sectors, such as construction management skills. Shoddy buildings in India are becoming a thing of the past. Q: Is offshoring causing any Indian engineers here in the valley to consider returning to India? A: What happened is India liberalized in 1991 -- allowing foreign firms to do business. But it took them five or six years to adjust, so in 1996 the first foreign company was established and now it's quite common. But IT outsourcing still only comprises 4 percent of the business, but it is growing so there will be an impact to the valley. Q: There are roughly 30,000 Indian engineers in the valley, and I'd estimate no more than 300 have gone back. A: Will the rapid growth in offshoring continue as long as there is a substantial wage disparity between the two countries? Q: Oh, yes. The wage disparity is too much. Someone working in a BP tech support call center will make $1.50 [U.S.] an hour, including benefits. Over here, even if you paid $15 an hour, you wouldn't get happy workers. There it is viewed as a good career. The supply of labor is so huge for call-center work, it will take many years before the difference is cut to even half as much, probably 10 to 15 years. With IT outsourcing, in India you would be paying $3.50 an hour for a Java programmer versus $25 an hour here, so the eight-times differential still exists. Q: Is the practice paying off for valley companies? Any early report cards? A: Oh yeah, big time, especially on the BP side. You save 80 percent in costs. On the IT side it is beginning to pay off, now that it's a matter of in-house offshoring to your own subsidiary. Product software doesn't source out well because of the [feared loss of] intellectual property associated with it. Q: Is there a downside to offshoring work to India? A: A big concern for companies is the loss of knowledge. The last time that happened was in consumer electronics and the U.S. lost the lead. And business continuity is a big concern. You need to have payroll done at a certain time of the month, but if there is a power outage, which is more likely to happen in India than here, what are you going to do? And of course there is a very real concern over the loss of intellectual property.

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This seminar is part of SPRIE's Fall 2003 series on "High-Tech Regions and the Globalization of Value Chains."

Over the past two decades, the physical products that we consume have increasingly been manufactured offshore. More recently, some business and consumer services have started moving overseas. India is an important destination for such work, as it has low labor costs, good remote process management skills, and adequate infrastructure. The talk will report on a recent visit to India in which about fifty business process outsourcing firms were interviewed. The work is part of a research project funded by the Sloan Foundation on understanding the impact of the globalization of business processes on the U.S. economy.

Martin Kenney is a professor in the Department of Human and Community Development at the University of California, Davis and a senior project director at the Berkeley Roundtable on the International Economy at the University of California, Berkeley. His research includes the role and history of the venture capital industry and the development of Silicon Valley. Kenney's recent books include Understanding Silicon Valley: Anatomy of an Entrepreneurial Region (2000) and Locating Global Advantage (forthcoming). He has consulted for various governments, companies, the United Nations, and the World Bank. He has been a visiting professor at Cambridge University, Copenhagen Business School, Hitotsubashi University, Kobe University, Osaka City University, and the University of Tokyo. He holds a B.A. and M.A. from San Diego State University and a Ph.D. from Cornell University.

Philippines Conference Room

No longer in residence.

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Rafiq Dossani was a senior research scholar at Stanford University's Shorenstein Asia-Pacific Research Center (Shorenstein APARC) and erstwhile director of the Stanford Center for South Asia. His research interests include South Asian security, government, higher education, technology, and business.  

Dossani’s most recent book is Knowledge Perspectives of New Product Development, co-edited with D. Assimakopoulos and E. Carayannis, published in 2011 by Springer. His earlier books include Does South Asia Exist?, published in 2010 by Shorenstein APARC; India Arriving, published in 2007 by AMACOM Books/American Management Association (reprinted in India in 2008 by McGraw-Hill, and in China in 2009 by Oriental Publishing House); Prospects for Peace in South Asia, co-edited with Henry Rowen, published in 2005 by Stanford University Press; and Telecommunications Reform in India, published in 2002 by Greenwood Press. One book is under preparation: Higher Education in the BRIC Countries, co-authored with Martin Carnoy and others, to be published in 2012.

Dossani currently chairs FOCUS USA, a non-profit organization that supports emergency relief in the developing world. Between 2004 and 2010, he was a trustee of Hidden Villa, a non-profit educational organization in the Bay Area. He also serves on the board of the Industry Studies Association, and is chair of the Industry Studies Association Annual Conference for 2010–12.

Earlier, Dossani worked for the Robert Fleming Investment Banking group, first as CEO of its India operations and later as head of its San Francisco operations. He also previously served as the chairman and CEO of a stockbroking firm on the OTCEI stock exchange in India, as the deputy editor of Business India Weekly, and as a professor of finance at Pennsylvania State University.

Dossani holds a BA in economics from St. Stephen's College, New Delhi, India; an MBA from the Indian Institute of Management, Calcutta, India; and a PhD in finance from Northwestern University.

Senior Research Scholar
Executive Director, South Asia Initiative
Rafiq Dossani
Martin Kenney Professor University of California, Davis
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The most important policy measures are those that improve the quality of rural Chinas human and physical resources and infrastructure that will provide the skills and abilities to rural residents that seek to integrate themselves into the nations industrializing and commercializing cities. Successful development policy, however, must also recognize that modernization is a long process that will depend on maintaining a healthy agriculture and rural economy.

While a rural development plan has many components, we restrict our attention to three broad issues: (a) the nature of Chinas new economic landscape and measures to enhance it; (b) changes that are needed to improve rural government and its partnerships with the rural population; and (c) reforms and investments that can improve Chinas resources: labor, land, capital, water, forests and the environment of the poor.

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Scott Rozelle
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The success of India's export-oriented software industry is well known. Whether information technology (IT) can contribute to development beyond the obvious income effects generated by software exports depends on how pervasive are IT's impacts on the economy, ranging from improving the efficiency of existing businesses, to enabling new kinds of goods and services. In a developing country such as India, it is of particular interest whether such benefits can reach the poor, and even help in directly reducing the deprivations associated with poverty. Professor Singh's talk and paper will examine two ongoing experiments that aim to provide IT-based services to rural populations in India. Several features distinguish these experiments from others: a combination of public and private efforts, with "nonprofit" organizations acting as catalysts; goals of commercial sustainability, both for the local entrepreneurs and the nonprofits; and an eclectic approach to the services that are sought to be provided. The paper's main contribution is to draw some preliminary lessons from comparing two different approaches in localities that are geographically close and economically similar. While the ultimate goals of the two organizations studied are quite similar, he identifies some important differences in implementation that may have more general implications for the success of such experiments. Nirvikar Singh is currently Director of the Business Management Economics Program at the University of California, Santa Cruz, where he is Professor of Economics. He teaches courses on business strategy, technology and innovation, and electronic commerce, as well as graduate microeconomic theory. He has consulted for the World Bank and for high-tech start-ups in Silicon Valley. Professor Singh's current research topics are electronic commerce, business strategy, technology and innovation, governance and economic reform in India, federalism, international water disputes, and economic growth.

Dan and Nancy Okimoto Conference Room, Encina Hall, third floor, east wing

Nirvikar Singh Professor University of California, Santa Cruz
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China and the World Trade Organization

On balance, will the nation's accession to WTO help or hurt rural residents? How will they affect rural incomes? Who in the rural economy will get hurt? Are there some in the rural economy who will be insulated from the effects of WTO?

The general goal of our essay will be to begin the discussion of these critical questions. In particular, we will attempt to meet this broad goal by pursuing three sets of objectives. First, we will examine the record of rural incomes, in general, and then focus on how employment may be affected by China's accession to WTO.

Second, we will attempt to understand how WTO will affect the agriculture sector, in particular. To do so, we will provide measures of the distortions in China's agricultural sector at a time immediately prior to the nation's accession to WTO and seek to assess how well integrated China's markets are in order to understand which areas of the country and which segments of the farming population will likely be isolated from or affected by the changes that WTO will bring. Ultimately, with a knowledge of the size and magnitude of the impacts, researchers will be better able to begin working on understanding how the policies that WTO will impose on China will change the gap between the domestic and international price and affect imports and exports, domestic production and production, prices, income and poverty.

Third, we will examine the policy options that the government has available to them in the wake of WTO.

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Scott Rozelle
Scott Rozelle

The complex issues arising from child labor have been addressed in several of the most significant ways--yielding the most important lessons--in the Asia Pacific region. It is in the Asia Pacific region too, that the greatest number of child laborers live. This conference will address the complexities of child labor and review the range of key "solutions" to improve the condition of children--especially impoverished, working children--in the region. Some people claim that abusive child labor is an inevitable byproduct of agrarian and developing economies. But is this accurate? What measures will alleviate abuses and hasten the elimination of exploitation? The United States is now the largest contributor to the ILO's International Programme on the Eradication of Child Labor. At the same time, the United States and US-based business have been accused of contributing to increases in child labor, through trade practices that allegedly expand inequality, or through the strong U.S. role in promoting neo-liberal economic policies through the activities of multilateral agencies such as the World Bank and the IMF. What role can the United States play in alleviating the problem--and what role is it playing now? Are the critiques accurate? The term "child labor" conjures up images of poor young people, working in unsafe conditions, receiving inadequate wages, their health imperiled for life and their opportunity for education denied. What policies are appropriate to bring the worst practices to a swift though humane end? Much of the debate has been highly polemical, but more recently, the tone of the discussion has begun to change. It has begun to focus on the concrete measures that can be undertaken to improve the conditions under which children work, and to eliminate the abuses and exploitation to which millions of children are subjected. Participants in this roundtable will share the latest empirical findings on child labor in Asia and identify policies that are at the cutting edge in dealing with this issue.

Bechtel Conference Center, Encina Hall, Stanford University

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The story of South Asia is that of missed opportunities. Mr. Burki will take a look at South Asia in comparison to East Asia. Mr. Shahid Javed Burki started his career as a member of the Civil Service of Pakistan. He held various positions including Director of West Pakistan Rural Works Program, Economic Advisor to the Governor and Chief Economist of West Pakistan, and Economic Consultant to the Ministry of Commerce. In 1974, Mr. Burki joined the World Bank as Senior Economist in the Policy Planning Division. He was promoted to Division Chief of the Policy Planning and Program Review Department and later became Senior Economic and Policy Advisor in the Office of the Vice President of External Relations. After becoming the Director of the International Relations Department of that vice-presidency, he was appointed Director for China and Mongolia, helping to design and implement the World Bank's lending program in China - at one point the largest Bank-financed program in the world. Mr. Burki was appointed Vice President of the Latin America and Caribbean Region and worked in this position until his retirement in August, 1999. Upon leaving the Bank, Mr. Burki was invited to head the EMP-Financial Advisors, LLC, a consulting firm located in Washington, D.C. Mr. Shahid Javed Burki was educated at Government College, Lahore; Christ Church, Oxford University (where he was a Rhodes Scholar) and Harvard University (Kennedy School and Economics Department). He holds graduate degrees in Physics and Economics.

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Shahid Javed Burki Visiting Scholar, A/PARC Speaker Stanford University
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The rate of investment sufficient to provide developing Asia with a reasonably adequate supply of electricity is immense, ranging from a World Bank estimate of 2000 megawatts (MW) each month (which translates into an annual investment of about $35 billion per year) to even higher estimates. All of the larger countries of developing Asia have been looking for foreign direct investment (FDI) to provide a significant amount of the needed capital. In 1996, financial closings for new power projects in developing Asia reached $13.7 billion, or almost 40 percent of the lower range of the estimated requirement. Although data on the foreign share of the monetary value of financial closings is not available, it is likely to be over 80 percent. Thus, the foreign share of total direct investment in power projects in developing Asia appeared to have been around 30 percent before the East Asian currency crisis.

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Shorenstein APARC
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Robert Thomas Crow
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Ken-ichi Imai is an internationally recognized expert on the economics and management of the firm, industrial organization and the economics of technological change and innovation. After receiving his Ph.D. from Hitotsubashi University, Imai went on to become an assistant professor, full professor and, eventually, Dean of the Graduate School of Business at Hitotsubashi.

In September 1991, he assumed the role of Director of Research at the Stanford Japan Center, stepping down in 2001. He was also named a senior fellow of IIS and a professor, by courtesy, of Stanford's Department of Economics, in 1991. In December 1991, he became chair of the Stanford Japan Center Foundation Board. Imai has been influential in both Japanese and international policymaking. In Japan, he has been actively involved in the development of national industrial policy at the level of MITI's Industrial Structure Consultative Council. Abroad, as a member of the drafting committee for the OECD's Technology, Economy and Policy Project, he has participated in discussions on the rules of conduct for multinational enterprises and global industry.

Imai has published widely in Japanese and English, and many of his books and papers have received prizes in Japan. His Industrial Organization of Japan's Energy Sector (in Japanese) was awarded the Economist Prize, and his Modern Industrial Organization (in Japanese) received the Nikkei Prize for Excellent Books in Economic Science. In addition, the Japanese government awarded its Prize for Social Science Research in Telecommunications to Imai's Industrial Society - The Process of its Evolution and Change (in Japanese). His Information Network Society (in Japanese) became a "long-seller" in Japan in 1984. As director of SJC-R, Professor Imai actively promoted collaborative research between the United States and Japan. For this purpose, he has organized and hosted a number of international forums, including: "A New Techno-Economic Paradigm for the 21st Century "The Age of New Engineering"; "Sensors, Information and Global Ecosystems"; "The Roles of Government in Economic Development: Analysis of East Asian Experiences" (sponsored by the World Bank); and the "Future of the Computer Industry". In Spring 1995, the Crown Prince of Japan awarded Professor Imai the government's Purple Ribbon for his cumulative academic and social contributions.

Director Emeritus, SJC-R
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