So, what is “impact sourcing” and why is it important?
It is part of a continuum of approaches that clients can take when they outsource IT-related work to bottom-of-the-pyramid suppliers, summarised in Figure 1, adapted from a previous blog entry on IT sourcing from the BoP:
- Exploitative outsourcing seeks to bear down on wages and working conditions in order to minimise costs and maximise profits.
- Commercial outsourcing is a mainstream approach that reflects the steady diffusion of outsourcing from cities to large towns to small towns and beyond.
- Ethical outsourcing (also known as socially-responsible outsourcing) takes commercial outsourcing and requires that it meets certain minimum standards; typically relating to labour practices but also starting to include environmental issues.
- Social outsourcing (also known as developmental outsourcing) differs from ethical outsourcing as fair trade differs from ethical trade. Ethical outsourcing involves existing commercial players with either a commitment to or measurement of adherence to standards. Social outsourcing involves new non-market intermediaries who sit between the client and the BoP supplier.
Figure 1: BoPsourcing Approaches
As shown in the diagram, “impact sourcing” is a rather loose agglomeration of a number of these models, defined as “employing people at the base of the pyramid, with limited opportunity for sustainable employment, as principal workers in outsourcing … to provide high-quality, information-based services to domestic and international clients” in order “to create sustainable jobs that can generate step-function income improvement”.
Impact sourcing received a significant fillip in 2011 when the Rockefeller Foundation released its report on “Job Creation Through Building the Field of Impact Sourcing” which suggested that this activity was already well established in countries like India, South Africa and Kenya. (The definitional quotes above are taken from p2 of that report.)
Report authors Monitor estimated that impact sourcing was already a US$4.5 billion market employing 144,000 people and “has the potential to be a $20 billion market by 2015, directly employing 780,000 socio-economically disadvantaged individuals”. Rockefeller has subsequently set about funding and encouraging significant growth in this market.
The various terminologies can be confusing and, personally, I prefer the more immediately-meaningful “BoPsourcing”. However, this new model is clearly already sizeable, and likely to be growing fast in future. It also – despite the absence from the name – has IT as a foundation: all these types of outsourcing are IT-based and IT-focused whether they involve data entry, digitisation, back-office processing, search engine optimisation support, etc.
In that case, where is the research on impact/BoP sourcing? The answer is: almost entirely absent as yet. The journal article on “Social Outsourcing as a Development Tool” is a rare exception, which traces the developmental impact of one initiative using this new model.
In that case, what research should we be doing: what is the impact sourcing research agenda?
A helpful guide comes from two articles recently published in the Journal of Information Technology by Mary Lacity and colleagues: “A Review of the IT Outsourcing Empirical Literature and Future Research Directions” and “Business Process Outsourcing Studies: A Critical Review and Research Directions“. These papers review the literature to date on IT outsourcing overall, and on BPO specifically, summarise that literature in an overview model, and propose a future research agenda.
Figure 2 – from the first article – summarises the review of IT outsourcing research (including overlaps with BPO research), which boils down to the factors which affect outsourcing decisions by client firms (e.g. whether to outsource or not; or what type of contract to use), and the factors which affect the outcomes of outsourcing (typically the outcomes for the client firm or its relationship with the supplier).
Figure 2: Review of IT Outsourcing Research
Given the lack of existing work on impact sourcing, all these relations are yet to be investigated, so Figure 2 already sets a sizeable research agenda. However, we can tease out more in three ways.
First, because Lacity et al lump rather a lot together into the “outcomes” category. The nature of the client-supplier relationship is better understood as part of the process by which outcomes are achieved. From this, we can identify a set of outsourcing process research that could be applied to impact sourcing – from the “COCPIT” approach to maximising client-supplier relations in IT outsourcing, to work on the development of intermediaries in IT outsourcing relations. Treating decisions as key inputs, the research agenda can be shaped around an Input – Process – Outcome structure.
Second, because the Lacity et al map is of past research. Their papers also identify generic IT outsourcing research priorities for the future that will apply equally to impact sourcing, including the effect of broader environmental factors on client decisions, such as public attitudes; the capabilities required within suppliers; and the different financial and business models being used.
Third, because impact sourcing is different from mainstream outsourcing: it involves different suppliers, often different intermediaries, different business models, different objectives, etc. This adds a set of additional research agenda items not previously identified, such as:
- Needs and means for building capabilities within BoP suppliers.
- A broader typology of business models that spans the boundaries of traditional business and traditional development.
- The requirement to judge business models in terms of their accessibility (to lower-income groups), ethicality (e.g. providing a decent income for the suppliers involved) and sustainability (for BoP suppliers, their clients and the intermediaries).
- Understanding that clients may want more than just a financial bottom-line outcome from impact sourcing.
- Analysing the developmental outcomes of impact sourcing, including the effect on the livelihoods of individual suppliers.
Putting all this together, we get the research agenda summary shown in Figure 3.
Figure 3: Impact Sourcing Research Agenda
If this research is to be done well, in a way that adds lasting knowledge, it must be well-theorised. Dealing fully with this issue would require pages of text, but we can identify some examples:
- Inputs and Processes: transaction cost economics can provide a quantitative basis for exploring decisions and business models; resource-/capabilities-based perspectives on organisations offer a more qualitative route (see Mahnke et al 2005).
- Outcomes: the livelihoods framework or Sen’s capability approach can be used to assess the developmental effects of impact sourcing.
Beyond these initial pointers, though, there are many other theoretical foundations waiting to be used.
If you identify some gaps here – i.e. some other priority research issues that need to be addressed, or some other theoretical models that will be appropriate to apply to impact sourcing – then do add your thoughts.Follow @CDIManchester
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