Outsourcing to Pakistan, a Challenge?

When we talk about outsourcing, Reliability is the first word that pops up. But how would you define, scope and measure this factor when considering different options for outsourcing. When we go for it dig out the factors, lay down the reasons it becomes a long list and has certain specifics tagging different reasons to different areas and regions.

But I had a good catch when I went out hunting some common and more generic factors hitting every other inverter evaluating outsourcing extensions. Here are some of those commonalities:

1. Infrastructure Troubles
2. High Attrition Rate
3. Competition in growing Outsourcing market

Before nailing them down to see “How’s” and “Why’s” of every one of them I would like to add some specifics for Pakistan to tie my discussion down to the topic of its origin. What would an executive sitting in US or in Western Europe think of when outsourcing in Pakistan.

Here are new additions:

4. Terrorism
5. Political Instability
6. Inconsistent Policies

Let’s now have a deeper insight into each one of the issues:

Infrastructure Troubles:

Why is it in the list of commons? That’s the first question that comes to our mind. The answer is simple, when we choose outsourcing we are looking for low cost areas and going down to a low cost area would take you to most of under developed and/or developing countries. The rest is obvious, under developed countries would have issues of infrastructure that might be because of energy crises, limitations of technology, poverty rate, illiteracy or anything else but result would be a hindrance in laying down a good setup to meet our very basic and foremost notion of “Reliability” that we started with.

Talking about Pakistan, we are trying to overcome this problem by concentrating on some specific cities and making them technology Hubs. We have so far made it all reasonable stable and working in Karachi, Lahore and Islamabad.

High Attrition Rate:

Attrition rate is a very specific disease most obvious in private sector in Pakistan. “Why’s” of attrition rate would take us to another long debate but “how” does it affect outsourcing is the real point for us. If we have a setup outsourced to Pakistan for example, we will train new hires for our specific business domain putting extra effort and energy but then if those hires start moving out the door that would not just cost us another hiring cycle but that would also be taking out a trained mind and would cost us another training cycle as well to get the new man prepared. Following graph shows attrition in different sectors.

I have seen companies taking special measures to keep their employees motivated to stay longer in the setup to overcome this issue.

Competition in Outsourcing market:

Outsourcing is a big opportunity for underdeveloped countries and regions. So everyone is trying to cash this opportunity and in turn creating very tough competition for others. How does it become a challenge for the investor? Let’s talk about Pakistan being our core example, I’m planning a setup in Pakistan to outsource my development and to lower my production cost. I do negotiate, bargain, for all factors of uncertainty to increase my percentage of reliability, but when I reach a good level, my calculated, planned and expected cost of development per unit goes up and similar setups in India and Bangladesh offer me much lower than the figure I’m getting.

So the key to survive this competition would be to lower the factors causing uncertainty, in other words increasing reliability without bulging up the cost can increase our visibility curve for investors outside.

Terrorism:

Think of Pakistan and unfortunately that’s the first alarming thought that will push you far off from any investment. Reasons are pretty obvious so I don’t need to go any further on this as why would it be a change for the investors.

With the passage of time as Government is very much aggressively taking action to cope this challenge, we will soon have this issue deleted from this list of factors/challenges.

Political Instability:

It’s another issue that hits our markets everywhere. Stock market faces major fluctuations because of ups and downs being seen in political gauge. This factor adds on to uncertainty and takes the graph of reliability down.

The only cure to this would be to get our literacy rate high, so that masses can contribute well toward political developments and make things more predictable instead of a particular class playing with the atmosphere.

Inconsistent Policies:

Policies of one government are favoring for a certain business while the very next government changes its priorities upside down then it becomes a big problem for a main stream investor.

We will have to keep our fingers crossed for this factor because it’s something our planners have to focus on to wisely decide priorities of the day. The only thing we can do is to vote wisely, helping good leaders to come up and good planner to plan our future.

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