Is your outsourcer an IT sweatshop?

The debate about IT outsourcing is growing more strident in the US, so how are CIOs and IT directors there responding to the issues?


CIO Ron Kifer wants to ensure that the outsourcing providers he hires are aligned with his own company's objectives. But Kifer uses more than the usual questions that examine whether the work can be delivered on time and on budget. He looks at social and ethical factors, too.

"We just got into IT outsourcing within the past couple of years, and we're trying to apply the same ideas: giving back to community, supporting the economies in which we live and work, green initiatives," says Kifer, who is a group vice president at Applied Materials, a California-based company that creates and commercialises nano-manufacturing technology. "We need to make sure that our suppliers are operating to the same high standards" as the company, he says.

Kifer is ahead of what some see as the next wave in contract employment: socially responsible outsourcing.

The International Association of Outsourcing Professionals (IAOP) lists socially responsible outsourcing as the No. 1 trend in the field for 2008. The association predicts that companies providing, using or offering advice on outsourcing will increasingly develop standards that go beyond pure business objectives to address ethical questions. It expects that these standards will touch on topics that indicate how a company interacts with people, the community and the environment, such as labor policies and green initiatives.

This isn't just a feel-good move, however. Proponents say that outsourcing providers with socially responsible policies -- as well as the IT shops that hire them -- will find that corporate citizenship has business value, too. It can lower expenses, such as the cost of replacing burned-out employees, and provide better outcomes.

"Social responsibility is good business, besides being a good thing to do," Kifer says.

How to check

An outsourcing provider's record on social and labour practices gives an insight into its ability to deliver products. Poor working conditions will contribute to high staff turnover, for example, says Christine V. Bullen, a senior lecturer at Stevens Institute of Technology and president of the Global Sourcing Council, a non-profit professional organisation.

Here are some questions that Bullen and others suggest asking to evaluate an outsourcing provider's record on social policies:

  • What percentage of the local workforce do you employ?
  • What are the laws in your area regarding the minimum age of employment?
  • What is the minimum age of workers you will employ?
  • What salary and benefits do you provide?
  • Does your compensation plan meet your workers' needs, and how have you reached that conclusion?
  • Tell me about workers' schedules: How many hours do they work in a week? How many days a week do they work? How many hours per shift? What are the starting and ending times?
  • What career paths are open to your employees?
  • Do you work with government or other stakeholders in the community to advance community development?
  • Do you provide education or training for community members outside your actual workforce?
  • How do you balance security needs and your employees' working conditions?
  • What green techniques are you using?
  • How are you reducing your carbon footprint?
  • Does your company have any environmental initiatives?

Concern about socially responsible outsourcing has been building for years, stemming in part from the fact that companies are adopting ethical standards for their own operations, says Jagdish Dalal, managing director of thought leadership at the IAOP.

"More people are looking at the ethics statements of the companies they do business with to make sure their statements are congruent," Dalal says.

There has been plenty of bad press over outsourcing and offshoring and the effects such practices have on employees and communities. Such coverage has raised concerns among companies that have seen the impact of their own corporate citizenship initiatives weakened by negative perceptions of their outsourcing partners, says IAOP Chairman Michael Corbett.

While critics have charged that workers employed by outsourcers -- particularly those offshore -- often earn unfairly low wages, Dalal says IT outsourcing providers certainly don't fit the stereotype of industrial sweatshops, with child workers and others labouring in unsafe conditions.

Still, Dalal says, "sweatshops exist anywhere there is unethical practice." In the IT realm, companies that expect workers to be on call constantly or to always put in extra hours without additional compensation could be downgraded in the eyes of prospective partners. And companies that hire such outsourcing providers could face negative public pressure, Dalal says.

The potential for bad PR isn't the only reason IT shops are beginning to look at this issue. Corbett says outsourcing has become a critical factor in the success of many IT departments, which heightens the need for proper management of it.

"It's not a new topic, but there's a new focus on it," Corbett says. "Businesses are increasingly looking at how the outsourcing decisions they make affect the communities they're working in."

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