Socially Responsible Outsourcing

Impact sourcing is an emerging phenomenon that aims to transform people’s lives, families, and communities through meaningful employment in the Information Technology Outsourcing (ITO) or Business Process Outsourcing (BPO) sectors (Lacity et al. 2012). The Rockefeller Foundation has been the leading global institution promoting impact sourcing through its Digital Jobs Africa Initiative. The Rockefeller Foundation supported two key reports by The Monitor Group (2011) and Avasant (2012). In The Monitor Group/Rockefeller Foundation (2011), impact sourcing is defined as “employing people at the bottom of the base of the pyramid, with limited opportunity for sustainable employment, as principal workers in business process outsourcing (BPO) centers to provide high-quality, information-based services to domestic and international clients” (p. 2). In addition to the Rockefeller Foundation, The Monitor Group, and Avasant, a number of organizations, like the International Association of Outsourcing Professionals (IAOP 2009) and National Association of Software and Services Companies (NASSCOM) foundation,¹ and scholars have begun to examine impact sourcing (Heeks 2012ab; Lacity et al. 2012) and its related concepts, ethical sourcing (Heeks 2012a), sustainable global outsourcing (Babin and Nicholson 2009; 2012), microwork (Gino and Staats 2012), corporate social responsibility (CSR) in outsourcing (Babin 2008), social outsourcing (Heeks and Arun 2010), and rural sourcing (Lacity et al. 2011).

Impact sourcing (ImS) is the practice of bringing digitally enabled outsourcing jobs to marginalized individuals. The idea that ImS can play a role in providing sustainable livelihoods to marginalized individuals in the global south is steadily gaining credence among academics and practitioners. The claims of ImS ventures of positively impacting lives of marginalized individuals through employment have been supported by recent empirical inquiries (e.g., Heeks and Arun 2010; Madon and Sharanappa 2013; Malik, Nicholson, and Morgan 2013; Lacity, Rottman, and Carmel, 2014). Researchers have so far adopted Amartya Sen’s “capabilities approach” (Madon and Sharanappa 2013; Malik et al. 2013) and the “sustainable livelihoods framework” method (Heeks and Arun 2010) to understand the impact of ImS on individuals and communities.

Rapid growth rates in India and other Asian countries have led to a significant reduction in the incidence of poverty but has also led to rising inequalities across sub-national locations, particularly across rural and urban sectors, and between skilled and unskilled workers (Ali 2007). A factor that has contributed to this trend is IT outsourcing activity in which a small segment of the population has benefited from an extraordinary boom while large segments of the population are stuck with low wages, little or no social services, and remote opportunity for improved mobility. In recent years new IT sourcing models have emerged as rising costs in urban centers have forced many large business process outsourcing (BPO) companies to outsource low value-added tasks to employees in rural areas with the role of government limited to that of a catalyst and facilitator. This new rural BPO activity is mainly driven by traditional players in the outsourcing market using revenue-based business models to reduce labor costs.

Governments in developing countries are increasingly involved in outsourcing: contracting out to a third party the provision of goods or services which could otherwise be provided by the client organization. We can characterize two quite different models used, each of which has some potential shortcomings.

This chapter investigates the social development impact of impact sourcing, an emerging sub-field of global Information Technology (IT) and Business Process Outsourcing (BPO). Proponents of impact sourcing claim that it can create outsourcing employment opportunities through Information Communications Technology (ICT) for marginalized people living in areas of poor employment opportunities (Monitor 2011). Impact sourcing is a relatively new field with intense research potential and limited research literature. Most of the global outsourcing academic literature is focused on various dimensions of the management of commercial outsourcing (for a comprehensive review see Lacity et al. [2010] and Lacity et al. [2011]).

Today, the competitive effects of globalization are no longer felt only at the level of the nation or the firm, but also directly by members of the labor force themselves. Technological developments facilitating outsourcing and offshoring of service activities gradually turn the world into a level playing field in which anyone can compete for work with anyone else regardless of his or her location (Friedman 2005). As a result, new, previously sheltered groups, particularly in Western labor markets, are now increasingly susceptible to direct competition from not only their domestic but also their international peers. If offshoring in the 1970s and 1980s mostly affected low-skilled blue-collar workers, many in the West are now expressing alarm that in today’s age of cheap telecommunications and declining barriers to distance, people in low-cost economies such as India can perform almost any job — whether high- or low-skilled — for a fraction of the wages in the West (Levy 2005). The critical divide in the future may be between types of work that are or are not easily deliverable through a wire (or wireless) and no longer between jobs that do or do not require high levels of education (Blinder 2006).

This chapter explores the practice of employing prisoners to perform business services for the public and private sectors. The International Centre for Prison Studies reports that there are 6,291,179 prisoners worldwide. The United States (US) has the greatest number of inmates with 2,193,789 prisoners and the highest incarceration rate at 737 inmates per 100,000 people compared to all other countries. Given that 95% of US inmates will one day be released and given that 70% of released inmates become repeat offenders (FPI 2012), any intervention that can help released inmates re-enter society successfully must have positive impacts on the individuals, their families and communities. Prison employment programs have been one such intervention method. In this chapter, we aim to study a special type of prison employment program: the hiring and training of prisoners to perform business services using a computer, otherwise known as “digitally enabled” business services (Carmel et al. 2013).

This chapter seeks to contribute to the corporate social responsibility (CSR) discourse of “doing well by doing good” in the domain of Global Information Technology Outsourcing (GITO). Matten and Moon (2008) define CSR as a “clearly articulated and communicated set of policies and practices of corporations that reflect business responsibility for some of the wider societal good” (p. 405). Authors including Bishop and Green (2008), Emerson (2003), and Porter and Kramer (2006, 2011) have all argued for a “doing well by doing good” approach to corporate social responsibility that utilizes pro-market strategies to increase returns on philanthropic investment. They posit that corporations that embrace social concerns create a “win-win” outcome for both parties (Falck and Heblich 2007). However, Ahmad and Ramayah (2013) highlight the controversy that exists, questioning whether ventures that devote resources and effort in trying to improve society will suffer in terms of performance, or whether enterprises that “do good” will also “do well,” and thus be successful both financially and socially. This issue remains inconclusive, as prior studies have presented mixed results (Roper and Parker 2013), highlighting the need for further empirical research. Furthermore, prior studies have largely been situated within a firm hierarchy or strategic alliance, and there is a paucity of literature exploring how the “doing well by doing good” approach to CSR might prevail in market-based interfirm outsourcing relationships. GITO presents an interesting context in which to study this phenomena, as it involves the subcontracting of IT services by transacting partners (client to a vendor) with some or all of the tasks undertaken in a different country (Sahay, Nicholson, and Krishna 2003).

This chapter examines the challenging realities of socially responsible outsourcing within a developed country. The research team was curious as to why clients are reluctant to outsource to a socially responsible Impact Sourcing provider within the borders of their own country. In exploring this, a deeper issue became clear, which now motivates this research. Impact Sourcing rests on the assumption that everyone wants to help marginalized populations when the reality is more complex, especially when there are deep-seated racist influences. The question our research addresses is this: how does a nascent Impact Sourcing enterprise balance inherent tensions to achieve both social and for-profit business goals?