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Are information services ‘disintermediated’ and ‘disembedded’ from place and social relations? Part One

Are information services ‘disintermediated’ and ‘disembedded’ from place and social relations?

In this two part blog, I want to reflect on our recent workshops with BPO/ITES managers in Kenya and Rwanda to answer this question (tentatively): No, the global market for information and knowledge based services is still very much embedded in place and social relations.

Please examine Exhibit A:

This diagram comes from the Canadian government’s guide for small and medium sized enterprises interested in ‘linking in to global value chains‘. Such diagrams suggest an easy dispersal of business activities around the globe; R&D wanders into California while Sales drifts to Europe and Assembly drifts to India.

Our project is concerned with Business Process Outsourcing (basically white-collar service employment) in East Africa: how does the internet enable the flow of such services across geographical, national and social boundaries? Do Indian, Kenyan and Rwandan companies compete on a global scale or are their value chains embedded in their geographic and social positions?

In this week’s post, I will focus on the strategies of Kenyan BPO companies trying to get access to international work and clients and next week I will focus on Rwandan companies trying to get ICT service work within the local Rwandan or regional East African economy. I will share of the drawings and comments made by participants in our workshops to demonstrate this point.

Among our Kenyan BPO workshop participants, there was a strong feeling of disconnection, a dependence on international intermediaries and an inability to provide secure employment in the current climate. This was starkly demonstrated in the following drawing:

The participant above has clearly distinguished between ‘international associate’ (presumably a consultant or intermediary) and an ‘international client’. Without direct contact with clients, the manager feels unable to provide full-time stable employment to his workers. Chains of intermediaries and consultants are typical within the global BPO industry, where big contracts are split and divided into smaller contracts distributed to multiple companies.

This sentiment of disconnection was reflected in other participant value chains. For example in the drawing below, we can again see the participant’s desire for ‘direct contact’ and dissatisfaction with the subcontracting relationships that currently predominate.

A number of participants expressed a desire to have international employees or offices to bring in more work. One participant explicitly stressed the importance of ‘presence’ with others stressing ‘access to the end client’ as a key variable in determining the success of a business model. These participants wanted the government to facilitate presence in foreign markets. The two following tables again emphasize the importance of having ‘presence’:

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This was also reflected in the ‘Samasource’ chain and it is interesting that a number of participants in both the workshop and from our broader sample of interviewees rely on Samasource to bring in a constant and steady stream of work. While the margins are lower when using an intermediary like Samasource, this reliability was extremely important to managers. Here is Samasource’s value chain:

 

Another thing that might be stressed is the unreliability of platforms like elance, guru and o-desk in the eyes of Kenyan managers. This was starkly shown in the following drawings of two participants:

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Their dissatisfaction with elance/guru.com/o-desk and their desire to connect with international consultants comes across very strongly. In the second drawing, the participant writes that ‘international mediation’ and ‘a lack of a national portal’ are two of the biggest barriers from having the kind of chain he/she wants. From the perspective of these two managers, it would appear that the transaction costs of conducting small-scale piecemeal projects available on platforms like elance and guru.com make this kind of distintermediated work unfeasible for serious companies (it may allow individual workers to keep a flow of work). Instead, there was a general consensus that managers want more ‘introductions’ through international workshops, foreign offices, social networks, international consultants, donors and a ‘national’ portal so that they can come into contact with bigger, more stable clients.

These participant drawings provide a nice snapshot into the global BPO industry from the perspective of Kenyan contractors. Our workshops really drove home the fact that cheap and accessible connectivity is not enough to surmount the challenges of forging a Kenyan BPO sector. It is difficult to by-pass and challenge the existing power structures and social relations that already exist. Kenyan companies must contend with powerful chains of consultants and companies who may support or exploit them. Social and geographic distance from clients makes it difficult for them to negotiate direct contracts and so they come to rely on platforms like Samasource to bring in work. Samasource has offices in client countries and engages in social networks around business and technological hubs. In the current difficult business climate, these kinds of organizations provide a lifeline to companies struggling, but in the long-run Kenyan companies want to have their own kind of ‘presence’; offices, employees and social interaction. Place and people still matter in the age of the internet.

This research is being carried out by Laura Mann and Mark Graham from the University of Oxford, Timothy Waema and Charles Katua from the University of Nairobi and Felix Akorli, Grace Magamno and Claude Bizimana from the National University of Rwanda. If you would like a fuller summary of these meetings or more information about the project, please do get in touch!

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