Tuesday, February 03, 2004

Outsourcing and the Importance of Language

One issue that tends to get overlooked when talking about offshore outsourcing is the importance of language issues in determining who gets what business. It is a commonplace that China is set to follow on the heels of India in the outsourcing business, but those who imagine that the Chinese can do anything the Indians can fail to reckon with an important reality: English is an official language of India, with a constituency of several million speakers within that country, while most Chinese are as resolutely monoglot as the typical American or Englishman. It is easy to imagine that all that is required is a few Chinese-English intermediaries, but this is quickly seen to be a fantasy when the nature of most work that is outsourced is considered - call centers, document writing, and even software programming are all occupations that require native-level English fluency, and China simply doesn't have people with such skills in the numbers required to consitute a threat. Even within India itself, the English fluency issue represents a serious impediment to the growth of outsourcing, as the number of fluent speakers of the language is estimated at no more than 50 to 100 million individuals, depending on whom one asks. That still constitutes a very large pool of talent, but, to put the number in perspective, it is at most equivalent to the combined population of the UK, Ireland and Canada.

I don't mean to portray the competitive pressures presented by the offshore outsourcing trend as non-existent; indeed, the pool of cheap English-language speakers stretches well beyond India alone, to embrace not just other South Asian countries like Pakistan and Bangladesh, but also ex-American colonies like the Philippines, and all of the former British colonies in Africa. Still, the same limitation faced by India is present in all these other places, with at most a minority of the native population possessing the requisite level of English-speaking ability to take advantage of the opportunities on offer. This may change in the long term, but as anyone who has ever tried to study a second language will know, such skills cannot be acquired in the space of a few months, unlike, say, an MCSE certification. It is a mistake, though an understandable one, for embattled IT workers to see in the vast populations of the Third World a "swart gevaar" that simply isn't there; competitive pressures do exist, but not quite to the degree that is feared.

One corollary of all the above that is also worth mentioning is that in the long-run the trend to offshore outsourcing actually presents a competitive advantage for the English-speaking nations of the developed world. Workers in countries like the Netherlands, Denmark and Sweden, and even larger ones like Italy, which are lacking in great numbers of foreign speakers, will be under far less competitive pressure than those in the Anglosphere, Spain, Portugal, France, and, to a lesser extent, Germany*, which may be good for the job security of workers in certain sectors of those nations' economies, but will have adverse effects for the productivity, and therefore the prosperity, of the countries as a whole. Ethnic pride being what it is, there is simply no prospect of the Norwegians or the Finns being happy to have all of their day-to-day interactions with their own governments, schools, banks, hospitals and so on being done in English, but the ever-increasing price to be paid for this linguistic stubborness will be in terms of foregone growth.

*Germany was the traditional lingua-franca of central Europe until the unfortunate events of the 1930s and 1940s, and a good knowledge of German is still a nice thing to have in Eastern Europe. As such, these nations are potential beneficiaries of outsourcing tendencies in Germany proper.