More bang for your buck: four ways impact sourcing adds value to your outsourcing spend
In the past several years, socially responsible outsourcing has increased in scale and quality, becoming a commercially viable solution and an emerging market trend. Recognitions by the Global Sourcing Council, IAOP, the Rockefeller Foundation, plus research by Accenture, Avasant, Everest Group, Monitor and others have contributed to the growth of this sector. Accenture defines this activity as outsourcing that benefits disadvantaged individuals in low employment areas – and claims that “the value proposition for impact sourcing is strong.”
About 40 firms now self-define as Impact Sourcing Service Providers (ISSPs) globally. They offer business process outsourcing (BPO) services with a commitment to employing underserved populations. These firms range in size from 20 to 2,000+ staff and in delivery models from crowd-sourced work to those operating much like traditional BPOs with owned facilities, dedicated employees and professional project management. Avasant has estimated that the size of the impact sourcing industry is approximately ten per cent of the total current BPO global employed workforce.
According to research by the Everest Group, impact sourcing increases income for disadvantaged individuals by 40 to 200%, with three to four family members benefiting from each person hired. While an important part of that value accrues to talented people employed in low-income communities, customers of impact sourcing firms share in these benefits. Impact sourcing firms now deliver high-quality cost-competitive solutions to Fortune 1000 firms and SMEs, as well as to prominent government institutions and non-profits. At the same time, they create additional value.
While social impact is one of the greatest differentiators for ISSPs, the impact does not only benefit those employed. Impact sourcing presents a commercial outsourcing solution whose impact benefits clients with added value beyond the economic benefits of the work delivered. As I shared at the IT Sourcing & Development conference at the University of Manchester, impact sourcing firms offer added economic value to clients through the way they do business. Based on our work at Digital Divide Data (DDD) with a wide range of clients, we’ve seen four distinct ways in which impact sourcing delivers additional value to clients. Specifically, impact sourcing can improve a client’s brand, more deeply engage employees, grow new markets and reduce risk.
1) Socially responsible sourcing can strengthen a client’s brand. By publicly sharing how impact sourcing is part of their supply chain, consumer-oriented companies can strengthen their brand. For example, the US discount airline JetBlue has widely advertised how their call centres provide employment opportunities for stay-at-home moms. In another case, the genealogy company, Ancestry.com, has started to embrace how their sourcing strategy reflects on their brand. Ancestry outsources digitisation of handwritten records from a variety of historic sources such as English and German records from the 18th, 19th and 20th centuries to add to their repository of over 60 million family trees and billions of records. By sharing the social impact of creating jobs, building skills and providing education as part of how it does business, Ancestry has strengthened its brand image with consumers.
2) Sourcing from ISSPs engages employees, strengthening loyalty to their employer. Outsourcing work can sometimes be perceived as a threat to employees. The American retailer Fossil has turned this effect around through impact sourcing since 2013. With 400 retail locations, 4,000 wholesale locations, and 13,000 employees worldwide, Fossil requires accurate data to ensure that their collections are tracked properly. As part of implementing this service delivery, Fossil sent staff to the field to train the workers on their projects. Fossil employees documented and shared the experience with fellow employees at their headquarters, repositioning outsourcing as a positive – rather than a threat. As a result, Fossil demonstrated to its staff one more way in which the company is an innovative pioneer, an attractive characteristic in a competitive employment market.
3) Sourcing from countries that are a market for a client’s products strengthens brand image, increasing sales. Increasingly, companies are looking to emerging markets to increase sales of their products. At the same time, impact sourcing firms are establishing a presence in new sourcing destinations. A major publisher with global sales saw the opportunity to source in countries beyond India and the Philippines as a way to learn more about new markets. By implementing a digital publishing strategy that sources work to these destinations, it is better positioned to pursue new opportunities in these markets with its own publications. To create these new revenue streams, the publisher utilised impact sourcing to convert diverse content formats – text, images, media – into a uniform one. At the same time, the publisher was able to gain a foothold for its brand in new local markets.
4) Sourcing from new geographic markets reduces risk. In the complex world of global outsourcing, there exists a myriad of risks. These include extreme weather and natural disasters, rising labour costs, high attrition rates and labour unrest. Diversifying the destination of a company’s outsourced workforce diversifies risk. For example, Cambodia, Ghana, Kenya or Nepal may serve as viable alternatives to typical outsourcing destinations such as India and the Philippines. Many firms source work to multiple firms in a variety of destinations. Consequently, an unforeseen shutdown in one country will not prevent the ongoing delivery of critical business processes.
In summary, many firms choose impact sourcing to cost-effectively deliver critical business process needs. The opportunity to realise added value with impact sourcing allows companies and institutions to act in a socially responsible way – while improving their bottom line.
About the Author
Michael Chertok is co-founder and Chief Business Development Officer of Digital Divide Data (DDD). DDD delivers digital content, data and research solutions to clients worldwide; the company’s innovative social model enables talented youth from low-income families to access professional opportunities and earn lasting higher income. Previously, Michael served as Program Officer at the Bill & Melinda Gates Foundation. He holds a BA from Yale University and an MBA and a Certificate in Public Management from the Stanford Graduate School of Business.