Into africa
Can South Africa ride the outsourcing and offshoring wave?
According to a recent study by McKinsey, a consultancy, South Africa is well placed to benefit from the trend of firms shifting business processes, such as customer care and payroll administration, to cheaper places. This, says McKinsey, could create 100,000 jobs in South Africa as well as attracting a modest but useful $90m-175m in foreign investment by 2008.
Global demand for offshoring from American and British firms alone is forecast to rise from $10 billion now to maybe $60 billion by 2008, 40% of which is likely to be in banking and insurance. That is more than countries such as India, China and the Philippines—which meet much of the demand today—are likely to be able to handle. So newcomers such as South Africa are after a piece of the offshoring pie.
As well as speaking English and being in a time zone close to Britain's, South Africa offers sophisticated insurance and banking sectors; a (modest) pool of skilled people; well-developed telecom and IT infrastructure; and good business services. British and American firms could cut the cost of some services by 30-40% by providing them from South Africa. That is why IBM has decided to open a global call-centre for international corporate clients in Johannesburg.
Yet much needs to be done if South Africa is to win a lot more business from abroad. There is no lack of competitors, from India to Malaysia and Singapore. South Africa has yet to market itself well as an offshoring centre. Other countries offer bigger investment incentives and make setting up shop far easier.
South Africa is also far pricier than the likes of India and the Philippines. Labour regulations are too rigid, raising the cost of doing business. The staggering price of telecoms is an even bigger problem. According to Genesis Analytics, a consultancy, a firm in South Africa will pay over nine times more than one in Singapore for ADSL broadband internet service, almost twice as much as in Malaysia for a domestic leased line, and 11 times more than in India for a local call. An international phone call costs 70% more from South Africa than India; leasing an international line to America costs ten times more.
More and faster competition is badly needed to cut the cost of telecoms—which would give call-centres a chance to flourish. The government now considers the offshoring sector a priority. A public-private partnership to drive the development of offshoring is being set up. South Africa must get its act together, or foreigners will send their business to other shores.
The Economist, August 25th, 2005
NOTES
to set up shop – открыть свое дело, открыть предприятие
Yet much needs to be done if South Africa is to win a lot more business from abroad – конструкция «to be + Infinitive» в условных предложениях переводится следующим образом: 1) для того, чтобы 2) если кто-то желает чего-либо 3) если суждено
ACTIVE VOCABULARY
customer care – обслуживание клиентов
payroll administration – расчет заработной платы
to meet demand – удовлетворять спрос
rigid – жесткий, строгий, суровый
incentive – стимул, побудительный мотив, поощрение
to handle – торговать, обслуживать, справляться, заниматься, иметь дело
to lease – сдавать/брать в аренду
leasing – аренда
to flourish – процветать
Suggest the Russian for the following word combinations.
To attract foreign investment, to shift business processes to cheaper locations, to meet demand, sophisticated insurance and banking sector, a pool of skilled workers, to cut costs, to win more business from abroad, to provide services, lack of competitors, rigid labour regulations, to set up shop, to offer investment incentives, to set up a partnership, to drive the development of off-shoring.
Text № 4
Translate the article into Russian in writing.
OFF-SHORING: PROS AND CONS FOR EUROPE
American companies lead the world in off-shoring business services to India and other low-cost countries. But faced with stiff American competition – due in part to the falling dollar – more European companies, especially British ones, are starting to offshore services. Will European economies benefit from the trend? The answer turns out to be yes – if certain conditions are met.
Even then, gains will not be evenly distributed: workers and communities that lose jobs may suffer considerable pain.
Incentives for off-shoring by European companies are huge: services costs can drop by 50% to 60%. And the scope for off-shoring is vast. By IBM estimates, less than 8% of the $19 trillion spent each year on sales, general, and administrative expenses has been outsourced so far. Many companies say they can offshore half or more of this work.
Offshoring of services should benefit Europe’s economy: companies will become more competitive so they can raise profits and reduce prices. This will bolster demand and keep inflation in check. Companies can invest to improve existing products or introduce new ones. Greater demand will spark innovation and create jobs to replace those that have gone abroad.
With flexible labor markets and strong economic growth, countries that offshore services can shift labor to higher-value activities, boosting productivity and living standards. And countries that attract outsourced jobs will enjoy improved productivity and higher growth, so they can buy more exports from offshoring nations. Applying this logic, the McKinsey Global Institute estimates that for every dollar U.S, companies spend on offshoring work in India, the American economy gains $1.14, while India gets ¢33. Thus, there are “win-win” returns for both high-wage and low-wage countries.
But a closer look at the logic reveals that benefits to the offshoring nation depend on two critical assumptions: the redeployment (or what percentage of workers who lose jobs find new ones); and the recapture assumption (or what percentage of the wages paid in lost jobs are recaptured by the wages paid in new ones). For example, the McKinsey calculations of gains from U.S. offshoring is based on the assumption that 69% of displaced service workers will find new jobs within one year and that these workers will earn 96% of their former wages. These assumptions are based on U.S. economy’s performance between 1979 and 1999.
More recent data from 2000-03 suggests these estimates may be overly optimistic. Even according to the McKinsey assumptions, nearly one third of American workers who lose their jobs will not find other jobs within a year. Older workers with less education are the most vulnerable.
In Continental Europe and Japan, where employment practices are more rigid than in the U.S., redeployment of displaced workers is likely to be lower. If low enough, this could cause an increase in the overall unemployment rate and a reduction in overall income in the offshoring country. In a recent study, McKinsey concludes this might be the case in Germany, where redeployment might reach only 40%. So German companies and shareholders could benefit from offshoring, while workers and the overall economy suffer.
By contrast, labor markets in Britain are more flexible, and offshoring is apt to generate both company-level and economy-wide gains. This is indeed the conclusion of the Advanced Institute
Of Management Research, which finds that service jobs have continued to grow strongly in Britain despite rapid growth in the offshoring of similar jobs by British companies.
Offshoring is a process of creative destruction. The challenge for governments is to develop policies that ease the pain that offshoring inflicts and speed workers’ transition to new jobs.
Business Week, December 6th, 2004
ACTIVE VOCABULARY
scope – пределы, рамки, размах, границы, масштаб, возможности
to bolster – стимулировать, содействовать, способствовать
to spark - побуждать, давать толчок, воодушевлять
“win-win” – беспроигрышная ситуация
assumption – допущение, условие
to assume – допускать, предполагать
redeployment – перераспределение трудовых ресурсов, перевод на другую работу
to displace – увольнять, смещать, вытеснять
vulnerable – уязвимый, беззащитный
performance - степень эффективности функционирования (напр. фирмы), результат, показатель деятельности
apt – склонный, подверженный, уместный, годный, способный
to inflict – наносить, причинять
Suggest the Russian for the following word combinations.
To offshore business services to low-cost countries, stiff competition, falling dollar, incentives for offshoring, to become more competitive, service costs, to raise profits, to bolster demand, to keep inflation in check, to spark innovation, to create jobs, to shift labour to higher-value activities, to boost productivity gains and living standards, “win-win” returns, unemployment rate, reduction in overall income, economic performance, strong economic growth.
Discuss the impact of outsourcing/offshoring on the developed and developing economies.