Capitalizing on the Dynamics of Service Value Chain Globalization

By M. Rokonuzzman, PhD

After creating enormous success stories in India and Philippine, the outsourcing of call center services has started to decline. Once, the progression of technology had helped such services to migrate from advanced economies to developing countries. However, further progression in that area is now enabling the software agents to take over these jobs. Does it mean that the high-paid job opportunities offered to the large student population of developing countries like Bangladesh through service globalization are heading towards the end? The question remains that in this era of outsourcing, what makes Bangladesh lack behind where previously, countries like India and Philippines have already seen success?

Technological progress has eliminated the barriers between people living in the remote areas and work processes to quite an extent. Such development has also contributed to the globalization of work processes, often termed as service value chain globalization or Business Process Outsourcing (BPO). During such transformations, certain work processes performed by human resources are often being taken over by technology. As a result, geographic redistribution of work along with the reallocation of job roles between humans and technology also takes place. For example, the expansion of international telecommunication circuits led to the globalization of call center services which transferred such service jobs from advanced countries to developing ones. On the other hand, the further development of technology has opened the opportunity of transferring such roles from remote service providers (call center agents) to software agents. However, that does not necessarily mean that the opportunity in service globalization is rapidly being eaten up by intelligent machines. Technological advancement is also opening the opportunities for globalization for many other work processes. For instance, it was previously an unthinkable option to create a linkage between older adults living in the remote areas and health services. Now technologies such as smart sensors, semi-autonomous assistive devices, or affordable augmented reality technologies have opened the possibilities of connecting the aging population of advanced economies like Japan or Western Europe to millions of potential remote care providers of Bangladesh as well as many other developing countries. Such translations are creating far greater global service opportunities than contact center jobs which are being transferred to machines from humans.

ITC (International Trade Center) has mentioned that the share of the developing countries in the world service export rose from 11% in 1990 to around 30% in 2010. This was aided by the increasing technological sophistication which led them to shift from the more traditional Transport and Tourism sectors to IT and other Commercial Services (business services). Service off-shoring activities accounted for $252 billion in export revenues in 2010 and employed 4 million people globally; UNCTAD’s 2012 World Investment Report points out that foreign direct investment in the service sector reached $570 billion in 2011. According to the World Bank database, commercial service export (other than travel and transportation) has increased from little over $1500 billion in 2000 to more than $4000 billion in 2011. Despite this growth potential, the share of the developing countries in world service export is still only 30% as very few of these countries are taking advantage of new opportunities that would arise from specializing in the export of services. Although low cost, low latency and high capacity broadband connections have created tremendous opportunities, Bangladesh is still failing to take substantial advantage by scaling up the piloted success of more than 200 export oriented software firms, IT service companies, ITES, and BPO organizations. On the other hand, among success stories, Philippines has succeeded in creating $18 billion BPO revenue while generating a million jobs.

Moreover, the reason behind the failure of scaling up these 200 firms must be addressed and worked upon to unlock Bangladesh’s potential. There are several reasons behind such failures. One of them being the demand driven expansion strategy of the local firms. These firms have insufficient access to risk capital. Moreover, the capacity in managing the risk of these businesses is also very limited, and they tend to serve small overseas clients. In serving small work orders of many small clients, Bangladeshi firms failed to benefit from reuse of digital assets, learning curve benefit, and economies of scale as well as scope. As a result, the cost of delivery of these firms is high which reduces the profit margin—limiting the ability of expansion using profit.

The decoupling of humans in getting the work done with the support of machines has been occurring and is expected to keep progressing further. Advances in automation, low latency connectivity, and the Internet of Things (IOT) is opening the possibilities of connecting millions of Bangladeshis to operate robots in advanced economies, to perform $8/hour routine work in an unpredictable environment. No robot is intelligent enough to carry out these tasks. The Avatar Economy may have far reaching opportunities, but the bottom line is that globalization of service value chain is opening tremendous opportunities for the world as a whole, and Bangladesh in particular. The combination of technology and globalization will have a profound impact on the way we’ll work in the future. The globalization of work by connecting people from anywhere in the world to work processes by low latency connectivity and sensor rich semi-autonomous machines are being influenced by five major forces:
1. Technological development
2. Globalization
3. Demographic changes
4. Social trends
5. Low carbon development

The application of humans in getting job done can now be accessed seamlessly, anywhere and everywhere, as the costs of communication and coordination have dropped to almost zero. There are several driving forces behind this mass virtualization of work. The first one being the cost, as it’s the fastest way to have more efficient operations. The second reason is counterintuitive, yet more profound. Communications and co¬ordination and the information revolution emerging from social networks, telepresence and mobility are enabling new levels of collaboration, changing the way we deploy technology, where and how we work and how the organization itself is structured.

To benefit from such expanding opportunities of service or work process globalization, instead of following the success stories, we should prepare ourselves to be at the right place at the right time with right capacity for capitalizing the unfolding opportunities. Instead of waiting to replicate the success stories, we should monitor and step in to lead the process of creating success stories. It should be noted that once an emerging opportunity takes off, leaders capitalize on the scale, scope and learning curve advantage to become cost effective and better producers, sometimes by engaging more expensive human resources than what new entrants may have access to. In the past, Bangladesh’s strategy of following leaders to capitalize on the service globalization strategy at the matured stage, whether it’s the call center industry or IT services, has failed because of this. It’s time to monitor, predict and manage the risks of entering a target industry segment to capitalize on the dynamic opportunity before it takes off. Such a strategy has the potential to connect a portion of 40 million students to the rapidly globalizing services and work process value chains to create an industry, which is mostly unimaginable to many of us at this stage.

The writer is an academic, researcher and activist. He currently works as the Dean of the School of Engineering and Physical Sciences and as a Professor at the Department of Electrical and Computer Engineering at North South University. He can be reached at zaman.rokon.bd@gmail.com.

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