The developing world: How much impact is impact sourcing really having?
Training and Development

The developing world: How much impact is impact sourcing really having?

“In Kenya, it is really hard to find a job. It was a really hard life,” says Martha, one of 7,000 workers that SamaSource, an impact sourcing initiative headquartered in San Francisco, has helped. Working in Kenya, Uganda, India, and Haiti, SamaSource aims to connect companies looking to outsource IT work, whether low level data entry or more complex tasks, with disadvantaged workers in developing countries.

The aim is to reduce poverty and increase employment, while still offering good quality, low cost labour to companies in the developed world. SamaSource is one of a number of such initiatives around the world. The question remains, though, just what impact does impact sourcing really have? The people helped are but a drop in the ocean in comparison to the numbers living in squalor around the world.

Impact Enterprises is an impact sourcing organisation founded by CEO Dimitri Zakharov, President Dan Sutera, and COO Bret Stickells. The organisation focuses on initiatives to bring impact sourcing to Africa, starting with Zambia. It was founded in June 2013 and unlike some other impact sourcing organisations has adopted a for-profit business model “in order to generate the capital required to create jobs at scale. In our first year, Impact Enterprises hired over 70 data specialists and grew by 30% month over month.” Although Impact Enterprises currently only operates in Zambia, Zakharov said that over the last couple years he has had inquiries from groups in Zimbabwe, Malawi, and Uganda all interested in creating their own impact sourcing service provider.

Although concrete statistics on the size and shape of impact sourcing internationally are difficult to source, interest in impact sourcing seems to be growing. Manish Sharma, senior managing director of Accenture Operations, explained that demand for impact sourcing is driven by the value it brings to all the parties and players involved in the service. For the people in countries with rising populations and high unemployment, impact sourcing is a great solution for battling regional poverty.

 

Growing interest

“It provides formal, stable employment with measurable increases in income levels between 40% and 200%,” he said. “That income usually goes back into healthcare and educational services. Asia, Africa and Latin America will account for 97% of population growth over the next 20 years, making the developing world the largest source of potential future employees.”

While most impact sourcing initiatives focus on developing countries in Africa, Asia and Latin America, Sharma emphasizes that impact sourcing does not need to happen thousands of miles away. “It’s also possible support disadvantaged individuals within developed countries like the UK or US.”

Chitra Rajeshwari, Executive Director of the Avasant Foundation, an initiative of global management consultancy Avasant, points to larger initiatives to educate buyers and service providers on impact sourcing such as the Rockefeller Foundation’s Digital Jobs Africa (DJA) as being key to raising awareness. She also noted that governments and corporations are increasingly taking into consideration their social responsibility when making decisions about outsourcing digital work. Avasant Foundation’s primary objective is to create education and employment opportunities for high potential youth in disadvantaged communities; part of this is impact sourcing.

Zakharov believes that there are three core reasons for the interest in this form of IT investment in development. Traditional non-profits that started as training facilities are seeing this as a way to monetise and sustain their operations. Organisations that were working on initiatives to provide digital literacy and connectivity saw this as an incomplete intervention. “Having access to a computer, after all, does not solve poverty. Impact sourcing is a way to translate those digital skills into income,” he said.

Globalisation and the falling cost of digital infrastructure means more operations will be outsourced. While this has been happening for over 30 years, Zakharov said that millennials are now putting increased pressure on socially conscious services – not just with outsourcing, but with everything in the supply chain from textiles to farming.

Lastly, impact sourcing in Africa is attractive because the continent has over one billion people, it is the youngest population in the world and will have the fastest growing economy in the next five years. Since 2000, the sub-Saharan economy has quadrupled.

“What this means for impact sourcing is we’ll see increasing demand for local expertise. Services that are being handled in Asia right now will have to be relocated to the African continent,” he said. “How that affects individual countries, like Zambia, will depend on the political situation, unfortunately. Hopefully, leaders will recognise the promise of the digital service industry.”

 

The multiplier effect

While demand is increasing, the actual scale of these impact sourcing initiatives remain small. Impact Enterprises, for example, has hired 140 people to date. Samasource has reached over 7,500 in the countries in which it operates.  

Avasant Foundation partners closely with employers and industry groups to ensure the the youth trained in its Digital Youth Employment initiatives are prepared for employment and get jobs. It leverages the industry expertise of Avasant consultants and industry experts from partner corporations to stay up to date on technologies and industry trends affecting the skills employers are looking for and how and where they can partner on hiring impact sourcing youth. 

According to Rajeshwari, Avasant Foundation's Digital Youth Employment Initiatives in Haiti and Jamaica have achieved 97% employment for disadvantaged, high potential youth aged 18 to 26 with leading ICT and BPO employers. “In Jamaica alone, AF in partnership with the University of Technology (Tech) has delivered demand-driven technology, communications, and customer service training that has prepared youth for employment with leading employers such as Xerox, itel-BPO, HGS, Tritel, and IBEX,” she explained. “What started as a pilot project for 30 youth has quickly expanded so that we are now preparing 120 youth for digital employment just this summer, and the project continues to expand.”

Avasant Foundation extends this initiative though its partnership with the Rockefeller Foundation on its Digital Jobs Africa Initiative to educate service providers on the benefits of impact sourcing, creating more than 1,500 impact sourcing jobs in the next one to two years across six countries.

 

While direct employment is often the focus, the real benefit of impact sourcing is in the multiplier effect, the fact that each person who is trained and employed uplifts those around them.

So for example 83% of Impact Enterprises’ 140 employees are supporting on average three and a half other people. Half of those employed have been female. As a result of the Impact Enterprises initiatives the salaries of those employed have risen 74%. The knock-on effect of that increased income combined with the impact on the broader family is what makes impact sourcing attractive.

Sharma noted that Accenture estimates that for every impact worker hired in India, the socio-economic benefits percolates to four to 10 related individuals. In the Philippines, the Accenture experience has been that the average annual income of impact workers increased by about 33%. “Many of our impact workers have achieved a significant increase in their annual income, have been able to pay off their education/bank loans, purchase additional amenities for their families, and afford a better lifestyle given stable employment,” he said.

 

Skills beyond IT

In addition to the broader indirect benefits for impact workers and their families and communities, much impact sourcing work also focuses on longer term employability and transferable skills. Impact Enterprises not only provides training on computers and research skills, but also in professional soft skills such as teamwork, communication, financial planning, goal setting, and even nutrition.

“Most of our employees only hold a high school degree, so they’re saving money to go to college. Our employees work full time for us, on average 12 months, and eventually leave to start their careers,” Zakharov said. “Now that we’ve been in operation for over three years, we’re seeing former employees working part-time during their school break, and we imagine some will return if they can’t find jobs right out of school.”

Interestingly, for many of those employed by Impact Enterprises the skills that have really benefited them have had little to do with hard ICT. Rodger, one of Impact Enterprises’ earlier employees who is now at college studying civil engineering, explained: “This was my first work experience in a real office, so I learned how to work together with people with different values and walks of life. Through my online research skills, I could find more information about how to start my company, to get ideas and inspiration.”

Debra, another Impact Enterprises employee, said: “It has helped in numerous ways to re-establish my self-esteem and confidence as a woman. When a person is surrounded by positive minded, dream-oriented, enthusiastic individuals, life is worth living because you know you can make it everywhere.”

Then there is 19-year-old Nelicy, who from the beginning, put in great hours and quickly advanced through her projects. While she was gregarious and smiling during breaks, she closed up in group discussions, afraid to articulate her ideas. However, when Impact Enterprises held a workshop on financial planning to teach key concepts like savings, interest rates, and inflation – rising prices is a major issue in Zambia since inflation reached over 20% in December 2015 due to a slowdown in Chinese demand – Nelicy understood the implication for her pay.

“The following Monday, during the weekly company morning talk, Nelicy raised her hand and boldly requested we raise wages, eloquently explaining how inflation is impacting everyone,” Zakharov said. “She was absolutely right, and we recalculated our pay structure that week. I admire her courage to stand up for her team.”

These anecdotal examples demonstrate the difference that impacts sourcing makes to the lives of those lucky enough to be involved. They are lucky, though, since such initiatives remain small and therefore reach only a small proportion of those who could benefit.

 

Challenges remain

For H. Karthik, an analyst at Everest Group, there are four core challenges that hinder impact sourcing from reaching its potential. The first is market awareness and consideration for intentionally pursuing impact sourcing, which is fairly limited. Many organisations already view global service delivery as a complicated and sensitive matter in terms of things like regulatory environments and risk, and are therefore reluctant to attempt using a less common model that may require altering their traditional approaches in terms of things such as location selection, contractual guarantees, provider selection, and monitoring. Karthik added: “With sufficient education and case studies, this can be moderated over time, but will continue to be a constraint.”

Impact sourcing also requires embracing a different talent model, which is the second core challenge according to Karthik. “Since most organisations are already struggling to integrate onshore and offshore, internal and outsourced delivery, and transactional and judgment-oriented talent models, a further dimension of potential complexity can be daunting,” he said. “The key is to focus on service requirements for which impact sourcing is uniquely positioned to meet the need.”

Karthik added that emerging technology capabilities such as automation and cognitive computing are removing the need for some basic work, which is instead completed by computers. “This then leaves more complicated tasks for the human workforce to complete and is generally less amenable to impact sourcing skill sets,” he said. “Although there are good arguments that this may reduce the aggregate potential for impact sourcing, there are some new types of demand which are created by these changes in technology.”

Karthik cited examples of machine learning technologies such as image recognition, recommendations, and predictive models that require extensive amounts of data to analyse and calibrate their algorithms. Much of the data they require may not be readily available nor structured in ways which can be accurately processed such as missing contextual tagging information or inconsistent conventions across data sets.

“In these situations, impact sourcing is proving to be incredibly valuable because it can help enhance data sets in a cost-effective manner and do so rapidly due to the ability to quickly scale the available resources. In fact, many ISSPs find that start-ups are among their most attractive customers,” he said. 

Lastly, Karthik said that having sufficient access to appropriately skilled talent pools is a concern. “Although the theoretical talent pool is large, the rate at which those individuals can learn the basic skills to operate effectively in a service delivery model is often slower than demand could absorb,” he said. He advised accelerating the growth of training institutes that collaborate across industry and communities to help unlock a greater flow of talent.

Sharma agrees that, to be successful, impact sourcing needs access to the right talent. “This can be ensured through minimum educational standards supported by training programmes. Accenture advocates the use of training partner organizations as a method of mitigating the risk of a talent shortfall.”

Rajeshwari suggests that in order to address these challenges and help impact sourcing to really achieve its upliftment potential, the sector should consider ensuring that a certain percentage of seats will be offered to impact sourcing job creation. “This will give hope to the youth who do not have the means to pursue higher education, an opportunity to get into the work force and change their lives for the better.”

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Bianca Wright

Bianca Wright is a UK-based freelance business and technology writer, who has written for publications in the UK, the US, Australia and South Africa. She holds an MPhil in science and technology journalism and a DPhil in Media Studies.

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