A Preliminary Report on Canada’s Competitive Challenges ... · A Successful Global Sourcing Strategy ... 13 RESPONDENTS ... To date the interdisciplinary, international EMERGENCE

A Preliminary Report on

Canada’s Competitive Challenges towards Advancing

A Successful Global Sourcing Strategy

A review of the nature and characteristics of outsourcing being carried out in Canada and the forces that are driving or impeding outsourcing activity Prepared by: Dr. Penny Gurstein, Lead Investigator, EMERGENCE Canada Clare Mochrie, Project Manager, EMERGENCE Canada Kevin Wennekes, VP Research, Canadian Advanced Technology Alliance With the assistance of Ursula Huws, Project Director, EMERGENCE and Asian EMERGENCE

EMERGENCE/CATA Global Sourcing Study Preliminary Report 1

Table of Contents

INTRODUCTION...........................................................................................................................................2

BACKGROUND............................................................................................................................................................2 CONTEXT FOR THE NEED BEHIND CANADIAN-DRIVEN RESEARCH ............................................................................3

Research Objectives..............................................................................................................................................5 RESEARCH APPROACH AND METHODOLOGY .............................................................................................................6

Research Questions...............................................................................................................................................6 Case Study Approach............................................................................................................................................7 eSurvey Approach .................................................................................................................................................8 Identified Challenges ..........................................................................................................................................10 Who Benefits from this Study? ............................................................................................................................11

THANK YOU .............................................................................................................................................................12 Survey Delivery...................................................................................................................................................12 Distribution Partners..........................................................................................................................................12

RESEARCH HIGHLIGHTS.........................................................................................................................13

RESPONDENTS..........................................................................................................................................................13 SIZE OF PROVIDERS/OUTSOURCERS BY SECTOR ......................................................................................................14 LOCATION................................................................................................................................................................16 SCOPE OF SERVICES OUTSOURCED/PROVIDED.........................................................................................................18 WORKFORCE PROFILE..............................................................................................................................................20 ICT USED TO MANAGE PROCESS .............................................................................................................................22 JOB SKILLS REQUIRED .............................................................................................................................................23 LEVEL OF SATISFACTION .........................................................................................................................................24

NEXT STEPS..............................................................................................................................................26

STARTING POINT FOR DISCUSSION...........................................................................................................................26 UPCOMING CONFERENCES/EVENTS .........................................................................................................................26

Trends in Global Sourcing Conference ..............................................................................................................26 Canadian Policy Responses to Global Sourcing ................................................................................................26 EMERGENCE 2006 Conference ........................................................................................................................26 CATA Outsourcing Committee ...........................................................................................................................27

THE RESEARCH CHALLENGES MOVING FORWARD ..................................................................................................27


Introduction

Background This report was developed in partnership by the Canadian Advanced Technology Alliance (CATA) Canada’s largest high-tech association, and EMERGENCE1 Canada, a project2 funded by the federal government to investigate the impact that information and communications technologies have on the changing nature of work in the new economy. EMERGENCE focuses in particular on the outsourcing of telemediated employment or 'e-work', between firms within Canada and between Canada and the rest of the world. This specific project investigates the international forces propelling outsourcing trends, in order to provide informative research to Canadian policy makers, industry bodies and other organizations interested in the economic and social implications of the new global economy. The primary goal of the project is to capture and document developments in e-work practices through qualitative case studies in every region in Canada, as they reshape employment and industrial patterns domestically and internationally. To date the interdisciplinary, international EMERGENCE research team, of which EMERGENCE Canada is part, has conducted over 150 case studies of companies in 18 different European countries, Australia, Canada, United States, and Asia in relation to the global outsourcing and work relocation patterns that are emerging as a result of information communication technologies. To complement the case study work completed by the Canadian EMERGENCE project members, CATA worked with them to develop an online survey with the intention of capturing a broader, more collective view of the issues being identified through EMERGENCE’s studies to date. CATA also supported the analysis of the results. This report contains the preliminary findings of the case study and survey research conducted to date. The results, while still in their early stages of development and analysis, can serve as a valuable discussion guide, and can point the way to:

1 Estimation and Mapping of Employment Relocation in a Global Economy in the New Communications Environment 2 Funding for this project is through a grant from the Social Sciences and Humanities Research Council of Canada (SSHRC) Initiative on the New Economy Program jointly sponsored by Industry Canada. For further details see: http://www.chs.ubc.ca/emergence/


explore the nature and characteristics of outsourcing being carried out in Canada;

understand the forces that are driving or impeding outsourcing activity; develop a stronger awareness regarding Canada's role as a leader in global

sourcing; identify future research directions related to outstanding gaps in our knowledge;

and, potentially start creating a roadmap towards a sound action plan for Canadian

Global Sourcing success.

Context for the Need Behind Canadian-Driven Research Across the globe, the widespread practice of global sourcing is profoundly changing the definition of the traditional workplace. Because of the lack of attention being paid to these transformations, Canadian society may soon find itself hard pressed to respond to this global phenomenon. Global sourcing and all of its manifestations (nearshoring, offshoring, insourcing, etc.) has transformed who does what work, when, where and how. These changes are breaking down the traditional dimensions of time and space that define what is, or is not, a 'firm', a 'workplace' or a 'job'. Making Global Sourcing possible is the growing practice known as eWork (electronic work): telemediated labour involving the processing and transmission of information via a telecommunications link. eWork occurs in a range of business relationships including global sourcing – where a firm or individual provides services to another firm in a separate location, governed by some form of contractual agreement – to geographically distant intra-corporate transactions, where services are provided to one branch of a firm by another branch of the same firm. As computerization has permeated all sectors of the economy and almost every business function, it is the ability for work to be wholly relocated by way of information and computer technologies (ICTs) that is creating new and divergent employee/employer relationships; including radically new approaches in management methods, organizational structure, work culture, contracts of employment and customer expectations. Since the early 1990s, there has been a dramatic growth in eWork practices; first in the U.S. and then diffusing globally. While no reliable estimates exist of the total extent of eWork in North America or globally, studies on global sourcing trends report that it is in widespread use by companies looking for ways to remain competitive by allowing for increased flexibility, access to advanced technology and expertise, specialization of companies in fields of real competitive


advantage, and reduces costs. It is perhaps indicative of the importance that firms place on tele-mediated activity that fully half of all corporate spending is done on Information and Communications technology. Currently, Canada’s role and position in managing and adapting to these changes is hard to determine due to a desperate lack of substantive research undertaken in this area. Some recent peripheral research underlines the need for this type of study. A Canadian Federation of Independent Businesses study of global sourcing trends in 2000 reported that outsourcing is a business strategy adopted by nearly 80 per cent of Canadian businesses in the manufacturing and transportation sectors, as well as in certain service sub-sectors. A 2004 study by PricewaterhouseCoopers on the impact of offshore IT Services on Canada’s IT Landscape found that outsourcing within North America is growing at an average of 10 to 15 per cent annually. And in SUCCESS, a recently released book based on interviews of Canada’s top 100 CEOs and business leaders conducted by the Canadian Advanced Technology Alliance, global sourcing is cited as one of the most important corporate strategies for remaining competitive in terms of reducing overhead costs, increasing supply-chain efficiency and allowing for greater internal focus on core products and services. What is the role of Canada in this activity? To seek a better understanding of this, one must look to primarily American-based research on this subject. The Center for International Development at Harvard University’s ‘Network Readiness Index’ (NRI) reveals Canada’s position to be twelfth out of 75 countries. The NRI is an international assessment of a country’s capacity to exploit the opportunities offered by ICTs, and the first global framework to map out factors that contribute to this capacity. The NRI defines network readiness as the degree to which a community is prepared to participate – or has the potential to participate – in the Networked World. What are the implications of this rating to Canada? The EMERGENCE project is attempting to determine just that. The EMERGENCE project has categorized countries globally and highlights their relative level of activity in the eWork economy. In an exploratory study3, a number of indicators were used to identify national strengths and weaknesses in each country’s ability to attract eWork, including: relative service sector salaries; graduate availability; language(s); time zone; telecommunications infrastructure; trust or previous contact; internet literacy; and openness to economic development. Canada emerged from this analysis as an “eMaybe” country.

3 Huws, U et al, Where the Butterfly Alights: the global location of eWork, IES Report 378, Brighton, 2001


The eMaybe category denotes countries with small populations, well-developed infrastructures and human resources but possibly without the necessary capacity to see prolonged or notable growth in major relocated employment. Included in this category are some centres of offshore banking, like Bermuda, Barbados and Jersey as well as developed countries like Ireland, Liechtenstein and Luxembourg. The term eMaybe also refers to those countries that seem to act as both sources of outsourcing work abroad and destinations for work outsourced by international firms. Canada’s presence in the eMaybe category suggests that it is neither a winner nor a loser in the acquisition of eWork activity. Initial research shows that compared to other countries, Canada is a relatively small player in the digital economy given the low volume of eWork outsourced by or to Canadian firms. This analysis may also suggest that Canada plays a dual role in the digital economy; acting as both a source and destination for outsourced work. In order to seek out a better understanding of this exact role and towards potentially providing a roadmap for Canada’s eWork future capacity, the Canadian EMERGENCE project has partnered with the Canadian Advanced Technology Alliance to engage in this study of Canadian eWork practices in the hopes of better understanding Canada’s position in the global market for eServices. This study aims to help Canadians understand the implications of eWork on society and its workers. The bleak forecast is that jobs will move offshore over the next decade as a result of the unprecedented scale of corporate globalization and the erosion of Canada’s technological edge. eWork will increasingly be restructured and relocated to venues that provide the cheapest labour with the least regulatory restrictions. However, given its position in the world economy, Canada could potentially gain jobs if the right decisions are made. This is very much an opportunity to think globally but act locally. Can Canada do it? It’s hoped this study and subsequent discussions with key academic, labour, and private and public sector organizations can help answer this more concretely, but for now, the response is a definite “eMaybe”.

Research Objectives The aims of the EMERGENCE research project, and supported by the CATA e-survey, are:

To investigate and identify the motives, enabling technologies, organizational and cultural facilitators and barriers involved in the relocation of eWork.


To consider the processes involved with relocation, their social consequences

and employment effects.

To determine what the regional push and pull factors are in the delocalisation of work using ICT's.

Research Approach and Methodology The two distinct research areas that comprise the basis for this report includes:

1. highlights from the findings of the EMERGENCE Canada project case studies completed to date; and,

2. the relevant findings from the e-survey. The research questions and methodological approaches of the e-survey and case studies are outlined below.

Research Questions The two research approaches shared similar areas of questioning, in turn rooted in the approach used in other EMERGENCE research in Europe, Asia and Australia. There are three main question areas:

1. What are the aims, the processes and the forms of relocation, the critical success factors, and the costs and benefits?

What are the companies' motives for relocation? Who are the social actors involved in decisions to relocate work? What are the key enabling technologies, the forms of implementation and

the use of the technical infrastructure? What features of organisational structure and corporate culture act as

facilitators of, or barriers to, new forms of working? What are the HR and training issues? What are the knowledge

management issues involved? Are they critical for success? What are the costs and benefits? How are they assessed?

2. What are the impacts, in particular the consequences for employment?

What are the positive or negative impacts on the local labour market in both source and destination regions?

What are the characteristics of the workers whose jobs are most likely to be endangered?


What are the characteristics of the workers most likely to benefit? What are the characteristics of telemediated jobs in terms of skills level,

wages, working hours, contractual arrangements etc.?

3. Why are some regions much more successful than others in attracting information-processing work?

What are the factors in the national and regional environment (economic, social and political), which act as facilitators of, or barriers to, these new forms of employment?

What are the characteristics of source and destination regions? What are the push and pull factors?

What are the criteria used in selecting a location for information-processing work? What are the processes of selection and decision-making?

Naturally, the degree to which an in-depth and probing response could be obtained varied according to each approach. The case studies offer much greater opportunity for a thorough review of the areas being explored. In the survey approach, it was understood that a briefer, more succinct capture of key questions would be required in order to better encourage the participation of the respondent group.

Case Study Approach The approach employed by EMERGENCE Canada is in-depth case studies modeled on a survey technique utilized in the EU, Asian and Australian EMERGENCE projects. It is intended that upon the completion of the project in 2006, 17 case studies will be completed of Canadian firms that outsource activities to companies or relocate their own activities both within Canada and abroad, giving particular attention to outsourcing or relocating to Pacific Rim nations. The selection of the case studies (in terms of establishment size, sector, location and business activity involved) has been based on the prevalence of source and destination establishments in relation to these variables. The selection of case studies has also taken into consideration the regions of Canada and have been selected to ensure that there is case studies from Atlantic Canada, Quebec, Ontario, the Prairie provinces and Western Canada. The cases focus on e-work relocation affecting a relatively large number of employees rather than individual workers or small groups. Thus, call centres, back offices and electronic outsourcing arrangements are of primary interest. Consistent with EMERGENCE research elsewhere, the case studies cover a range of business functions including:

Data capture and data processing; Systems and software development and maintenance; Accounting and financial management;


Sales; Customer service; Training and staff development; and Editorial and design functions.

The case studies capture the dynamics of employment relocation in both ‘source’ areas in Canada, from which certain kinds of information-processing work may be migrating, or from which they may be controlled, and ‘destination’ areas domestically and abroad, which are currently attracting employment of this type. Existing EMERGENCE research suggests that not only have some regions been more successful than others in attracting these new forms of employment but also that the uptake of e-work within local areas varies greatly from country to country. These very large differences in the take-up of e-work cannot be explained simply in terms of technological and economic factors. It is clear that social, cultural and organizational factors also play a critical role. The EMERGENCE research instrument is innovative in using indicators which make it possible to carry out a systematic comparative analysis of organizational structure and culture in a way which takes account of the different national regulatory, social and policy environments in which organizations are embedded. The case studies are based on in-depth interviews with a range of key informants at different levels within each organization, and, where available, analysis of secondary data such as media reports and company documents. This includes executives, managers, workers, and where appropriate, union representatives in both the “source” and “destination” companies. The research instrument has been adapted from one successfully developed collaboratively by the EU EMERGENCE team and tested in 18 European countries, Australia and Asia.

eSurvey Approach The survey process was comprised of three distinct phases: design, execution and reporting.

Design

Starting in September 2004, CATA, working closely with the EMERGENCE project team, assisted in the design and development of a questionnaire that was consistent in addressing the issues being captured in the case studies as well as being mindful of the need to be sensitive to the pitfalls of providing an online survey that could prove to be too long or complicated and subsequently prone to respondent fatigue. An online pilot test of the final draft version of the survey was conducted in mid-November and received excellent feedback. Minor adjustments were made and the survey was made launch-ready. The final survey consisted of a total of 33 questions. Only those who identified themselves as being both a Provider and Outsourcer would be required to answer all the survey questions,


otherwise Outsourcers only would respond to a possible 19 questions and Providers only were posed 20 questions. In mirroring the EMERGENCE process, it was decided that the survey should attempt to target those who:

manage staff in the provision of outsourced services are responsible for managing an outsourcing arrangement

The survey’s introductory page explained that the purpose of the survey was to explore the nature and extent of outsourcing being carried out in Canada as well as the forces that are driving or impeding outsourcing activity. It further defined Outsourcing as “relocated telemediated work”; work which is either outsourced to another company or relocated internally to another branch of the organization (also called in-house remote relocation) The survey was estimated to take no more than 10 minutes to complete, based upon pilot test feedback.

Execution

The survey was officially launched on November 23, 2004, and had an original deadline of January 31, 2005. The survey was announced through the provision of a detailed news release (http://www.cata.ca/Media_and_Events/Press_Releases/cata_pr11230401.html) and distributed to CATA’s members and leadership networks. The project team also enlisted the aid of other organizations to assist in the promotion of the survey via a web link on the partnering organizations site or through an e-mail campaign to their own networks. A full list of these participating organizations is available on Page 12. As the original deadline approached, the project team decided to extend the survey’s availability and provided a new deadline of February 28, 2005. A news release was prepared announcing the extension and the international interest being generated in this survey initiative. (http://www.cata.ca/Media_and_Events/Press_Releases/cata_pr01270501.html) In the end, the survey received a total of only 69 completed responses. While this is clearly not a statistically valid sample, the results do mirror the common trends and indicators being realized in the case study approach and as such serve as an excellent starting point for further discussion and subsequent inclusion in this report. In many respects they also echo the results


of the much larger random employer surveys carried out by EMERGENCE in Europe and Australia.

Reporting

The results of the survey have been interpreted by both the EMERGENCE and CATA team and the relevant results provided for this preliminary report. This report is expected to serve as a discussion platform for the planned April 13 Conference with the aims of identifying the structural advantages Canada has with respect to becoming a leading Global Sourcing country and a means to advance them.

Identified Challenges There were a number of challenges realized in the conducting of this survey:

Timing: The initial launch and much of the survey’s running time fell across the December/January timeframe – a traditional holiday period where many absences or pre-and post holiday activities would have caused many potential participants to overlook or feel less inclined to participate in a survey while focused on other priorities.

Narrowly-defined respondent group: the emphasis on managers of the process

clearly limited the respondent group to include only the individual responsible for the arrangement rather than potentially including anyone involved in, or impacted by, the outsourcing arrangement.

Lack of understanding regarding the definition of Outsourcing: Many

respondents may have not perceived their firm to be outsourcers and not considered the use of external service providers for non-core processes such as Accounting, Marketing, Sales, etc. as fitting the definition. This points to more awareness needed regarding the definition of Outsourcing/Global Sourcing in relation to today’s workplace and market environments.

Perceived need to be invisible: Potential respondent companies may prefer to be

invisible in terms of their activities given recent attention on outsourcing that focuses on employment loss.


Who Benefits from this Study? The work of the project will be of direct value to:

Consultants, companies and other stakeholders in employment location decision-making

Anyone involved in economic development at regional and national levels SMEs in the knowledge industries looking for niche markets in the new global digital

economy Anyone involved in training, employment creation and equality of opportunity policy stakeholders involved in the development of employment policies Anyone involved in the development of policies relating to international trade in

services and in monitoring industrial location strategies International aid agencies Researchers in the fields of economics, econometrics, economic geography,

organisational theory, science and technology policy, development studies and other related disciplines

National statistics offices


Thank you The following organizations provided invaluable support and assistance in the delivery of this initiative. The CATA/EMERGENCE Team wishes to thank these organizations for their support as delivery and distribution partners for the survey component of this study.

Survey Delivery The project team would like to thank Alain Azzam at ePenso.com for the provision of its survey services in the delivery of this report.

Distribution Partners The EMERGENCE and CATA project teams asked for and received significant assistance in helping raise awareness of the survey during its pilot run. We would like to thank the following organizations for their assistance in promoting the survey through their web sites and/or an e-mail campaign.


Research Highlights

The following section of the report provides the research highlights of the two initiatives. With respect to the e-survey, some interesting comparative data between the providers of outsource services (Providers) and those companies outsourcing said services (Outsourcers) in six core areas:

1. Size of Providers/Outsourcers by business function 2. Location of Providers/Outsourcers 3. Scope of services provided/outsourced 4. Workforce profile (age, gender, employment status, home-based workers, etc.) 5. Job skills 6. Satisfaction with the outsourcing arrangement

These results, along with relevant EMERGENCE case study findings, are explored in the following Section.

Respondents A total of 69 individuals responded to the survey. As demonstrated in the chart to the right, the majority of respondents were those who outsourced a service(s). As the survey was effectively two parts: one set of questions for Providers and another for Outsourcers, the actual number of respondents to each set of questions can be demonstrated as:

Count Percent Count with Both

Outsourcers 31 45% 46

Providers 17 25% 32

Both 15 22% None of the above 6 9% Total 69 100%

Respondent Breakout

45%

25%

22%

9%

Outsources businessfunctions

Provide outsourceservices

Both

None of the above


Size of Providers/Outsourcers by Sector The following tables demonstrate the size of the Provider/Outsourcer as identified by their industrial sector.

Providers Less

than 50 51 to 100

101 to 500

501 to 1000

Over 1000

Total

Construction 1 0 0 0 0 1

Finance & Insurance 1 0 0 0 0 1

Health Care & Social Assistance 0 0 0 0 1 1

Information & Cultural Industries 1 0 0 0 1 2

Manufacturing 2 0 0 0 0 2

Mining, Oil, and Gas 1 0 0 0 0 1

Professional, Scientific and Technical Services 7 1 1 0 3 12

Telecommunications 0 0 1 0 0 1

Other 3 2 2 1 1 9

Total 16 3 4 1 6 30

Outsourcers Less than 50

51 to 100

101 to

500

501 to

1000

Over 1000

Do not

know Total

Arts, Entertainment and Recreation 2 0 0 0 0 0 2

Educational Services 0 0 0 0 0 1 1

Finance and Insurance 1 1 1 0 0 0 3

Health Care and Social Assistance 0 0 0 0 3 0 3

Information and Cultural Industries 2 0 0 0 0 0 2

Professional, Scientific and Technical Services 8 1 1 1 0 0 11

Public Administration 0 0 1 0 1 0 2

Telecommunications 7 2 0 0 0 0 9

Other 4 4 0 0 1 0 9

Total 24 8 3 1 5 1 42

As identified in the tables above, the majority of both Providers and Outsourcers indicated having less than 50 employees and were primarily from the Professional, Scientific and Technical Services sector. The “Other” category responses included Marketing/Media services and various other ICT niche markets including Survey/Assessment, e-Commerce, and


Technical Sales and Services. The graphs below further demonstrate the Sectors in which the survey respondents worked and the size of their workforce.

“Other” answers provided included primarily ICT-based products and services providers i.e., e-Commerce, online banking, surveys, hardware maintenance, and those who managed other business services such as payroll, marketing and media relations.

Sectors

5%1%

7% 7%5%

28%

5%

21% 21%

3% 3% 3%7% 7%

3%

40%

3%

30%

0%

20%

40%

60%

80%

100%

Arts & Ent. Construct ion Educ. Serv. Finance & Ins. Health & Social Info & CulturalIndustries

M anufacturing M ining, Oil,Gas

Prof., Sci &Tech

Pub Admin Telecom Other

Outsourcers

Providers

Number of Employees

53%

19%

9%4%

13%

2%

50%

9%13%

6%

22%

0%0%

20%

40%

60%

80%

100%

Less than 50 51 to 100 101 to 500 501 to 1000 Over 1000 Do not know

Outsourcers

Providers


Home Office Location - Province4%

11%

2%

2%

77%

5%

Alberta

British Columbia

New Brunsw ick

New foundland

Ontario

Quebec

Location

As clearly identified in the charts above, the vast majority of both Outsourcers and Providers responding to this survey had home offices based in Canada, with very little representation existing outside of the Country. This was the anticipated outcome as the original intent of the study was to tap into Canadian business insights while providing a demonstration platform for International partners to review and consider for their respective regions. This is also

Location of Home Office

93%

2% 2% 2%

87%

6%3% 3%

0%

20%

40%

60%

80%

100%

Canada Egypt India United Kingdom United States

Outsourcers

Providers

Burlington 2 Burnaby 1 Canada 2 Edmonton 2 Kanata 2 Mississauga 2 Moncton 1 Montreal 3 Newmarket 1 North Vancouver 1 Ottawa 20 Scarborough 1 St. John's 1 Toronto 13 Vaughan 1 Victoria 3 Waterloo 1


corroborated by the case study research that has found that these activities are primarily occurring within Canada by Canadian firms or subsidiaries of firms. Of the Canadian firms, more than ¾ were located in Ontario and a combined 51% of Canadian respondents claimed either Toronto (21%) or Ottawa (33%) as their home office’s city. In these following tables, we explore the relationship between the organization’s home office location by Country and determine: a) where the work is being outsourced to; and, b) where the Provider’s clients are located. In the table below, one can clearly observe that Canadian companies are outsourcing primarily to other Canadian companies, and the Country also benefits from sources in the U.S. and the U.K. Country Being Outsourced To

Home Office - Country Brazil Canada China Colombia India Malaysia Romania

United Arab

Emirates

United States

Grand Total

Canada 1 28 1 1 3 1 1 1 2 39

Egypt

India 1 1

U.K 1 1

U.S 1 1

(blank) 1 1 2

Grand Total 1 30 2 1 4 1 1 1 3 44

In the proceeding table, we see that Providers located in Canada have primarily Canadian clients with only nominal amounts of work leaving the border, with the U.S. being the greatest beneficiary. Where the Provider’s Clients Are Located

Home Office Country Canada Egypt United Arab

Emirates United Kingdom United States Grand Total

Canada 18 1 1 5 25

Egypt 2 2

India

U.K

U.S. 1 1

(blank) 1 1

Grand Total 19 2 1 1 6 29

What these numbers seem to be demonstrating is that Canadian firms tend to rely primarily on other Canadian firms for the skills and expertise they require to deliver and or provide an Outsourced service. The case studies have also revealed this preference to remain local. Particularly in the early stages of outsourcing a business function, source companies


interviewed in both Canada and the US have indicated a penchant towards provider firms within their national context or within close proximity. Indicative of this preference, there are a growing number of offshore provider firms that establish local offices to serve as a domestic point of contact for their clients. Case study research also is starting to map outsourcing activity regionally. Not surprising, the concentration of eWork services are clustered in those provinces with large traditional business sectors such as Ontario, Quebec, Alberta and British Columbia. This suggests a possible correlation or synergy between existing services and those areas amenable to eWork growth. However, Manitoba and New Brunswick have shown growth in eWork services mainly because of significant policy interventions in this area and heavy investment in eWork infrastructure and development over the last decade.

Scope of Services Outsourced/Provided Survey respondents were asked to select all the services their organization outsourced or provided.

As demonstrated in the graph above, the majority of Providers identified Software development, IT maintenance or support (IT – 53%) as the primary service being offered. From the service being outsourced perspective, Creative functions (Design, editorial or other forms of creative or content-generating work including R&D) was the most commonly outsourced service with 40% of respondents identifying this as such. This was also closely

Services Being Outsourced/Provided

38%

16%13% 13%

27%

4%

13%10%

13%

23%

10%

53%

3%

40%

9%

31%

10%

33%

20%

0%

20%

40%

60%

80%

100%

Financial services Creat ive funct ions Customer service Data processing HR M gmt Product dev &test ing

R&D IT Telesales Other

Outsourcers

Providers


followed by Financial Services (Accounting, debt collection or others) at 38% and IT at 31% of all respondents. Based on case study research these findings only tell a partial story. While professional, scientific and technical services such as software development are an important source of outsourcing activity, equally important is the service sector such as contact and data processing centres, which was not identified very strongly. Especially in regions of Canada that do not have a strong research and development (R&D) infrastructure, the low-end ICT work is actively being promoted. US companies are finding it attractive to locate contact centres in Canada where they can find a skilled, multilingual labour force. As well, Canadian companies are locating contact centres in regions where there is a regulatory climate and a skilled labour force that can support their activities. While there is a concentration of small companies who outsource activities the case study research has revealed a concentration of large companies who outsource specified functions such as human resources to outsource providers. This is reflected in corporate strategies that emphasize streamlining the corporate structure to only provide core functions that further the company’s mandate.


Workforce Profile The survey asked Providers to identify some key characteristics of their workforce.

As these pie charts and those on the following page reveal:

The majority of Providers (83%) hire less than 50 employees

The majority of their staff are slightly

older, more experienced individuals, with a slight majority (43%) falling into the 26 to 30 age group compared to 37% falling into the 31 to 45 group. It is interesting to note that none of the respondents selected the Under 18 or 18 to 25 age groups options. It is notable that there are relatively few in the over 45 age bracket.

The majority of the staff make-up is

male, with 60% of respondents identifying males comprising 60% or more of their workforce. This is perhaps consistent with the dominance of IT functions in the sample. Other EMERGENCE research suggests that women are more likely to be found in contact centers and data entry functions – both of which were poorly represented in this sample.

The vast majority of Providers do not

offer a unionized environment for staff, with only 10% of organizations indicating that some form of unionization exists for their staff.

Close to two-fifths (38%) of all Providers

indicated employees work from home.

Number of Employees

83%

3%

3%3%

7%

Less than 50

51 to 100

101 to 250

251 to 500

Over 500

Average Age of Employees

37%

10%

10%

43%

26 to 30

31 to 45

Over 45

Do not know

Gender Distribution

17%

10%

3%

10%

23%

37%

80% + male

60-80% male

Half & Half

60-80% female

80% + female

Do not know


Of those who do have employees working from home, the majority (50%) have less than half their workforce doing so.

The findings above reflect the characteristics of the respondent companies. However, due to the limited scope of the sample, they are not necessarily reflective of outsourcing activity more generally. Contact centres, for example, often employ upwards of 800 employees and the workers are predominantly, young, female with a large concentration of recent immigrants.

Unionized Employees?3% 3% 7%

87%

Yes

No

Some

Do not know

Work from Home?

16%

47%

38%Yes

No

Do not know

Proportion of Employees Who Work from Home

25%

17%50%

8%

Less than half

About half

All

Do not know


ICT Used to Manage Process In looking at the various forms of ICT being used to manage the process, we can see that e-mail is the highest utilized technology with 86% of both Outsourcers and Providers relying on its use. This is very closely followed by the telephone, again with both Providers and Outsourcers identifying this technology as the second most-utilized technology. As a general rule, Providers were much more likely to make fuller use of all the technological options available over the Outsourcers; a reflection, perhaps, of Providers’ desire and need to be fully and readily able to serve their clients.

ICT Used to Manage Process

23%

86%

25%27%

14%18%

80%

7%

66%

59%

41%

24%

55%

45%

62%

7%

14%

39%41%

66%

86%

31%

0%

20%

40%

60%

80%

100%

Audio/Videoconf.

LAN or WAN E-mail Extranet Fax InstantM essaging

Internet /WWW Intranet Specializedsoftware

Telephone Other

Outsourcers

Providers


Job Skills Required As illustrated in the chart below, we see a clear discrepancy between the importance of skills required to deliver (Providers) and manage (Outsourcers) an outsourcing arrangement. While all these skills are generally required and valued by both, Providers obviously sense a greater need to excel as befitting an enterprise being hired to provide a specific service(s). This is further validated by the Providers rating Customer Service skills as the highest rated skill (77%) over all others, including technical-based abilities.

Outsourcers seem to place a greater significance on accounting and legal skills than Providers as could be expected towards ensuring they are receiving the anticipated value stemming from the Outsourcing arrangement. Computer literacy and Communications were each areas of major importance for both Providers and Outsourcers.

Job Skills Required

27%

20%

51%

29%

9%

33%

16%

9%

74% 74%77%

32%

65%68%

35%

16%

44%

16%

38%

10%

23%

29%

0%

20%

40%

60%

80%

100%

Accounting &legal

Communicat ions Computer aideddesign

Computerliteracy

Customerservice

Languages People mgmt Project mgmt Software design Web design Other

Outsourcers

Providers


Level of Satisfaction

As demonstrated above, both Outsourcer and Provider respondents are overall, quite satisfied with the Outsourcing arrangements in place. When asked to comment on the reasons for their (dis)satisfaction with the arrangements, common themes could be found. For the most part, Outsourcers found that the arrangement was:

Cost effective – financially sound business arrangement Relieving undue pressure on staff Providing the desired results Achieving results that could not be obtained internally

Outsourcers also indicated that finding an organization with a similar culture, philosophy and willing to be a strategic partner were critical elements in making an Outsourcing arrangement work. Providers were less vocal in their elaboration on their ratings, but comments supported the need for their services by indicating that: the relationships were working well as they were providing excellent service, the client’s requirements and results match, and the value created by the relationship allows both sides to gain.

Level of Satisfaction with Arrangement

36%

51%

9%

2% 2%

45%42%

10%

3%0%

0%

20%

40%

60%

80%

100%

Very Satisf ied Satisf ied Neither Satisf ied norDissatisf ied

Dissatisf ied Very Dissatisf ied

Outsourcers

Providers


In line with these e-survey results, the EMERGENCE Canada interviews to date have revealed a number of factors that help to facilitate successful work relocations. These include:

On-going contacts with existing partners and support from parent companies Clear delineation of tasks or projects Workers’ involvement in preparation and planning Adaptation of work organization and technology to the new environment and culture Organizational change activities Focus on knowledge transfer and training

Barriers to work relation revealed through the interviews include:

Cultural differences in work environment Unclear understanding of what work can be outsourced Inappropriately high expectations Lack of sustained relationships between in-house and outsourced employees


Next Steps

Starting Point for Discussion This report is expected to help create discussion points and lay out a framework for mapping out the path ahead. The results from the above consultations will be used in addition to this report to help form a more comprehensive understanding of the implications to Canada and those who Canada deals with in respect to its pursuit of a world-class global sourcing strategy.

Upcoming Conferences/Events This initiative has resulted in the creation of a number of important conferences to explore and expand upon its preliminary findings.

Trends in Global Sourcing Conference The first such conference is being coordinated by the Canadian Advanced Technology Alliance and is taking place at the National Club on April 13, 2005. The conference will seek to explore Canada's role as a leader in global sourcing and demonstrate how to be a best-practice user and provider of global sourcing. It will be attended by panellists and audience members comprised of members of the private and public sectors, academics and labour representatives and the intent is to provide a forum to identify roadblocks, negative and positive attitudes and start creating a roadmap towards a sound action plan for Canadian Global Sourcing success. The emphasis will be on the identification of the structural advantages Canada has, and a means to advance them.

Canadian Policy Responses to Global Sourcing The second conference, being coordinated by EMERGENCE Canada, is taking place on April 15, 2005 on Parliament Hill. The session will attempt to determine what the implications for Canada are and is intended as an opportunity to bring academics, government, industry and labour together to identify significant trends and explore policy implications.

EMERGENCE 2006 Conference Work Beyond Boundaries: An International Conference on Tele-mediated Employment and its Implications for Urban Communities This international conference is planned for June 15 – 17, 2006 in Vancouver, BC to coincide with the World Urban Forum. The conference will be designed to attract academics, labour researchers and policy makers.


Themes of the conference include:

1. Organizational Dynamics of Global Value-chains

2. Regions and Institutional Shaping

3. Workplace and labor markets: Quality, control, culture and contestation

4. Global Comparative Research on eWork: Teamwork, Ethics and Methodology

CATA Outsourcing Committee CATA's Outsourcing Committee will be holding meetings to shape the positive steps needed to enhance Canada's position.

The Research Challenges Moving Forward While there has been some very active interest with research-based organizations in the U.S., South Africa, China, the UK and various Latin American countries with respect to working on a global roll-out of this survey, there are significant obstacles left to overcome in the pursuit of a truly global survey of this nature. These include, but are not limited to:

The end of EMERGENCE Canada’s mandate in 2006 – The EMERGENCE Canada/CATA partnership has been a positive and rewarding experience; even in light of achieving less-than desired responses to the survey. While future study in this area might be probable, without EMERGENCE Canada and the support of the international EMERGENCE team, continuing this particular survey’s momentum could prove difficult.

Substantive research costs substantive money – while this particular e-survey was cost-

effective and efficient, what is really needed is a major investment in impartial and large-scale data-gathering at an international level that uses a proper random survey approach and collects objective indicators.

Continuing the roll-out of this Canadian survey also presents challenges similar to the above. However, CATA is keenly interested in continuing this e-survey initiative and welcomes all interested parties to contact us with advanced expression of support; potentially in the form of expert advice on content and methodology design, distribution partnerships, participation in the survey, and/or sponsorship opportunities.

Documents

A Preliminary Report on Canada’s Competitive Challenges ... · A Successful Global Sourcing Strategy ... 13 RESPONDENTS ... To date the interdisciplinary, international EMERGENCE