Impact sourcing, also known as socially responsible outsourcing, refers to an arm of the business process outsourcing (BPO) industry that employs people at the base of the pyramid as workers. It is defined as employing socioeconomically disadvantaged individuals as principle workers in business process outsourcing centers to provide high-quality, information-based services to domestic and international clients. The traditional BPO sector is typically associated with high-end, high-contact functions like call centers, which require significant levels of education and language literacy. The Impact Sourcing sector focuses on utilizing workers from poor and vulnerable communities to perform functions with lower and moderate skill requirements such as scanning documents, data entry work, data verification and cleaning, video tagging, and microwork.
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The BPO Sector
Business process outsourcing (BPO) refers to the outsourcing of certain business processes (i.e. informational and transaction services) to third-party service providers. This business has grown over the past two decades to a hundred billion-dollar sector that directly impacts both international trade and the global economy. Growth in the BPO sector has been driven by five mega-trends:
Growth is likely to continue because the majority of these drivers are unlikely to reverse. The global estimate for the BPO sector as high as $574 billion by 2015. Developing countries have particularly benefited from the growth of the BPO sector, generating exports and millions of jobs. Leading centers for BPO include India, the Philippines, China, and South Africa.
Impact Sourcing Sector Origins
Impact Sourcing first evolved as a new sub-sector of the BPO industry in India as rising costs in urban centers forced many BPO companies to focus on higher end services such as voice. New BPO companies sprang up in rural India where they enjoyed both lower costs and attrition rates. Those BPOs, such as RuralShores, employed high school graduates and university students from agrarian, low-income families. In 2008, the South African government launched the Monyetla Work Readiness Program in which over 1,000 unemployed youth, mostly high school graduates, were trained for work in the country’s BPO sector; over 77% of the trainees found employment.
Impact Sourcing Sector Support
In 2010, The Rockefeller Foundation launched an initiative focused on poverty reduction through employment to further its core activities related to supporting “sustainable livelihoods” among poor and vulnerable populations. The Monitor Group and Rockefeller Foundation, borrowing from impact investing terminology, formally coined the term “Impact Sourcing” in a 2011 report that focused on the beneficial job creation aspect of the BPO industry. In 2012, the William Davidson Institute partnered with The Rockefeller Foundation to assess barriers to partnerships between BPO providers and ISSPs, to assess which countries have the highest potential to develop Impact Sourcing sectors, and to perform field research to better understand service provider best practices and the impacts of employment on workers and their families.
Other grantees who have partnered with The Rockefeller Foundation to support Impact Sourcing efforts include Accenture LLP, Digital Data Divide, the NASSCOM Foundation, Avasant, TechnoServe, and Samasource.
Impact Sourcing Service Providers (ISSPs)
Impact Sourcing Service Providers (ISSPs) are a group of organizations within the BPO sector that operate with a set of refer to BPO organizations with the specific social objectives. Many of these firms have, as an explicit part of their often defined in their mission, an objective to generate employment for and upgrade the skills of hire workers from poor and vulnerable communities to perform BPO work. Examples of leading ISSPs include:
Value Proposition
Impact Sourcing is viewed as an effective market-based solution to poverty alleviation and shows the potential to create millions of jobs for the young and those living in poverty. While long-term studies have yet to take place, Impact Sourcing has begun to demonstrate positive impacts on multiple aspects of well-being for workers and their families. Studies indicate that Impact Sourcing employees benefit with income increases of anywhere from 40 percent to 200 percent. Employment in Impact Sourcing also serves as initial entry point into the formal economy, which leads to valuable job experience that can help workers pay their way through school, receive higher education and move towards better careers.
Impact Sourcing also has the potential to benefit traditional BPO service providers, who are actively seeking alternate lower-cost destinations (i.e. smaller cities and/or rural towns) and pools of new and more affordable qualified workers.
While the potential benefits of Impact Sourcing are compelling, the sector faces challenges that have prevented it from reaching its full potential. These obstacles include the ability of ISSPs to secure new work and clients, as well as the ability for ISSPs to partner with and sub-contract for larger, more traditional BPO service providers.
Market Size
Impact Sourcing is considered to be in its early stage of development. The current market size is estimated at $4.5 billion, which represents about 4 percent of the $119 billion BPO industry. BPO Impact Sourcing directly employs approximately 144,000 people across all segments. Some estimate that Impact Sourcing has the potential to grow to $20 billion by 2015, employing 780,000 socioeconomically disadvantaged people globally. Avasant estimates that the market has the ability to grow to represent twenty three percent of the total BPO industry by 2020.