International service tradability
understanding the service offshoring
Pierre-Yves LEOJean PHILIPPE
Aix Marseille UniversityCERGAM-MI, Faculté d’économie et de gestion
MC MonnoyerToulouse University
France
The context
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International outsourcing of service activities fuels fears of globalization Low skilled jobs and skilled workers are both concerned Concentration on software, tech-consulting business,
marketing surveys, call centers, pharmaceutical testing services
But a small % of the total service workforce can be performed
in foreign locations Few truly multinational service companies Outsourced Job loss are less than job loss by service
productivity gains in home countries
ECLAC 2012 LEO et PHILIPPE
A research question Offshoring could take to a far greater
magnitude in the very near future Services are no longer “protected” from
international competition Former planned economies have opened up free
trade The drop in the price of telecommunications
has enabled the emergence of crossborder service exchanges
Which kind of offshoring for service firms ?
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AgendaTo clarify the debate
1. Service firms organization models
1. The mecanisms of service offshoring
1. Determining factors of delocalization
2. Conclusion
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1.Service firms organization models
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Traditional service firms Face to face in firm premises Dichotomy between back and front office
Professional service firms Face to face in client premises Administrative back office
Internet service firms No face to face, firm location in cyber space
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L’entreprise de service traditionnelle
ClientB
ClientB
Service A
Service B
ClientA
S
O
I
SupportPhysiqueet M.O
Managementde l'unité
SUPPORTPHYSIQUE
PERSONNELEN CONTACT
Jamaisvisiblepar leclient
"back office"
partiellement et/ouépisodiquementvisible par le client
"front office"
toujours visiblepar le client
ARRIERE DEVANT
Eiglier & Langeard
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client
Le modèle Flexiform
Directeur général
Équipe de gestion
Centre économique
consultant
client
consultant
Chef d’équipe
Aire de travail
Espace de liaison
Centre administratif
Unité opérationnelle
Unité opérationnelle
Environnement hors client
Flux de pouvoir : Flux d’autorité :
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Le modèle Internet
interfaces
serveur
données
Centres de données de 2° niveau
Exemplesbourse
bibliothèques
@personnel en contact
@client
@client
Centre logistique
ServuctionTraditionnelle
Hôtel, etc.
Cyber espace
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2.The mecanisms of service offshoring
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ICT bring costs reduction and new service concepts
The internationalization of firms works like a catalyser of the new concepts It constitutes a factor for standardized
procedures It brings plasticity
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2. Conditions of ICT use
Service immateriality
Propensity to be digitalized
Simple service offer
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2. Conditions of ICT use
Accuracy of information given by clients
Length of customer contact
Foreseeable service result
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2. Impact of ICT on service tradability
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Use of cross border relations instead of movements of person either the client or the contact personnel
Wiring of the foreign agencies to multinational networks
Production of services through network (Intranet, Extranet, Internet) on a fragmented mode by added value collected in different locations similar to industrial mode of production
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2.Impact of ICT on firms
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Spatial dissociation of back and front office Exportation of cross borders services Service of domestic clients by outsourced front
offices (call centers) Outsourcing of back offices working for various
domestic front offices Network of foreign front offices to share elements
of back office (client data, firm data) Grouping of back offices agencies of
multinational firm in central regional location
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2.Determinants of outsourcing - costs
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Low-wage work force, flexibility and skills
Cultural and linguistic proximity
International IT connections
Fiscal and administrative attractiveness
Metropolitan location in order to benefit of customers concentration, quality of infrastructures, skilled work force
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2.Determinants of outsourcing – demand
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Markets dynamics for customers services Level and growth of revenue per capita Urban concentration
Markets dynamics for producers services Level of externalization in the economy % of tertiary jobs in manufacturing firms Rate of structural sector change
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Type of Delocalization
Geography Fiscal and administrative environment
Economy Culture
Foreign agencyserving
local market
-Metropolitanpopulation-Transport & Telecom infrastructures- Climate
- Settlement laws
- Profit Transfer
regulation- Profession regulation
- Market size & growth rate
- Importance of the population
(consumer services)
- Consumer incomes (personal
services)- Tertiarization of
the economy (Business Serv.)
- Religious & social norms
- Cultural proximity
ECLAC 2012 LEO et PHILIPPE
3. Determining factors of delocalization
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Type of internationalization
Geography Fiscal and administrative environment
Economy Culture
Foreign agencyserving home
market
-Transport & telecom infrastructures-Compatibility of time zones-Distance
- Settlement law- Profit Transfer
regulation-Job flexibility
-Fiscal competitiveness-Bureaucratic
style
-Skilled workers with low wages-Importance of man power turn
over
- Common language- Cultural proximity
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3.Determining factors of delocalization
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Type of internationalization
Geography Fiscal and administrative environment
Economy Culture
Outsourced back office -Telecom
infrastructures-Compatibility of time zones-Distance
- Administrative
system-Job flexibility
-Fiscal exemption
-Light bureaucratic
style
-Skilled workers with low wages
-Importance of man power turn over
-Efficient laws and judiciary system against digital
piracy & counterfeit
- Common language
- Religious neutrality
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3.Determining factors of delocalization
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Type of internationalization
Geography Fiscal and administrative environment
Economy Culture
Regional outsourced back office
of multinational
Firms
-Central regional position-International metropolis-Transport & Telecom infrastructures-Infrastructures position (hub)
-Administrative system
-Job flexibility-Fiscal
exemption- bureaucratic
style
-Skilled workers with low wages
-Importance of man power turn over
-Efficient laws and judiciary system against digital
piracy & counterfeit
- Common language
- Religious neutrality
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3.Determining factors of delocalization
Conclusion
Several outsourcing trends:
- East to Western Europe
- North to South
No more shelter for service jobs
But still most services can only be consumed and performed locally
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06/2005 French Sénat
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