Uday Karmarkar, about
of services is linguistic and cultural»
There's a new geography of services.
We are riding a tidal wave of "industrialization"
of services. Globalisation and automation is transforming
the sector. Some segments of service jobs are at risk
in all developed countries and the claims against outsourcing
and off-shoring are huge in politics. Although, we have
no choice but to confront these economic facts in the
ground. To survive - and even take profit from this
reality - service firms must define an "industrialization"
strategy, recommends Professor Uday Karmarkar, from
UCLA. The linguistic and cultural footprints can be
of help. While still miniscule in absolute terms, global
trade in data and knowledge is growing rapidly. This
trade will occur primarily between countries with linguistic
and cultural similarities. The greatest opportunities
for this strategy will be in linguistic groups whose
wealth distribution is highly bimodal, explains professor
Uday. And in a two way: outsourcing and insourcing.
Interview by Jorge
Nascimento Rodrigues, editor of Gurusonline.tv.
Illustration by Paulo
Buchinho, December 2004
Forthcoming book in 2005
Uday Karmarkar is LA Times Professor of Technology and
Strategy. He is also Research Director of the Center
for Management in the Information Economy, at the Anderson
School of Management, at UCLA, in Los Angeles. He has
a Ph.D in Management Science from Sloan School of Management,
at MIT, and a B-Tech in Chemical Engineering, in 1968,
at the Indian Institute of Technology, Bombay (Mumbai),
India. He is director of several start-ups companies
engaged in sectors such as eCRM, ERP, on-line and desktop
learning systems, data mining software, etc.
at Harvard Business Review: "Will You Survive the
Services Revolution?", HBR, June 2004 edition (artigo
E-mail of contact: email@example.com
What's going on in that "services revolution"
you refer in your HBR article, with the increasing "export"
of services jobs: a corporate cabal against high and
middle knowledge intensive jobs, or the loss of service
competitiveness in developed countries in North America
and the European Union?
There is no "corporate cabal" or collusion
going on; rather it is the opposite - the force of competition
between firms that makes it necessary to look for the
most effective way of delivering goods and
services. This has happened with trade goods, with manufacturing
and now is starting with services. The EEC and the US
do have to make sure that the manufacturing story is
not repeated. Many managers were "asleep at the
wheel" and did not believe that Japan could compete
with them; many in Europe are still asleep. Fortunately,
the service picture is a little different, in that it
is harder for external firms to enter - but think about
what is happening in Europe with telecom and financial
So Europe may be helped and not
"menaced" by this globalization of services.
But it may still happen that although euro companies
do quite well, the jobs still shift.
What are the main ingredients of the services revolution?
From your point of view, what changes will be most profound?
The underlying factors are technology and competition.
The major visible strategies are automation, outsourcing,
"off-shoring", service redesign, and self
service. A significant consequence is new
global competition, at the level of links in the information
chain, and functions. Services will be re-bundled and
reorganized in many cases. Amazon and eBay are good
leading examples of one layer of a service being taken
over by a new form, but there are many others on the
Europe is "menaced" by the off-shoring
services revolution in telecom and financial areas?
In Telecom, some European countries are taking the
lead in globalization of telecom (e.g. Telefónica,
Deutsche Telecom, Orange, Vodaphone, etc.); in financial
services too, there are many global Euro
companies (Credit Suisse, ING, ABN AMRO, Banco Santander).
So Europe may be helped and not "menaced"
by this globalisation. But it may still happen that
although euro companies do quite well, the jobs still
shift. I.e. companies doing well is not the same as
employees doing well. In other business sectors (e.g.
business services, content management) outsourcing/off-shoring
can indeed be a menace, or at least something to be
Doing the "industrialization"
of services "right" is not the correct perspective;
it is more a matter of timing it right (not too early
and not too late). There is not much choice in terms
of doing - it has to be done. Just that in some case,
late can mean losing, but in most cases a little late
is not a big problem.
For each of the four possible "industrialization"
strategies you refer, can you give examples of companies
or groups that did it right?
Many examples from many industries: automation and
self service have already changed banking and financial
services (starting with ATM's and credit cards, going
to on-line formats). Outsourcing again
is widespread in financial services, and is spreading
to many areas of business services (ranging from payroll
and accounting to tele-selling and market intelligence).
Globalisation is rapid in transaction and
commodity sectors like banking and telecommunications.
Doing it "right" is not the correct perspective;
it is more a matter of timing it right (not too early
and not too late). There is not much choice in terms
of doing - it has to be done. As for exactly the right
time, I don't know that any better than anyone else.
Just that in some case, late can mean losing, but in
most cases a little late is not a big problem.
Can you give examples of service sectors that did
the "industrialization" strategies at the
Often the companies that do it well are new entrants.
For example the successful B2C dot.coms who used self
service and web based automation (including Amazon,
eBay, Expedia, and many others). Among incumbents, Schwab,
Wells Fargo. Among the telecoms, NTT DoCoMo (in Japan).
Old examples: ATMs, bar code, vending machines, auto
ticket machines, self serve gas pumps, etc.
With the Web revolution (work at distance is no
more a serious problem) and the "commoditization"
of the IT wave (as Nick Carr said recently in his book),
the middle class careers in North Western developed
countries are at bay? What will be the political consequences
of this shift?
Large political consequences, because the affected
people are not blue collar workers in factories who
are invisible to many of us. They are white collar workers
who are our neighbours (or even
ourselves). The media are also affected, and so will
be ready to talk about it. And of course, it makes for
a good political platform. But the real problem is helping
people (and firms) to make the transition
that is required. We have been through this with manufacturing
in the US.
What kind of jobs in high and middle intensive knowledge
will survive locally?
Those that require interaction, networking, knowledge
of language and culture, that are regulated, and that
require physical services (like medicine). Anything
that can be done remotely is at risk - so if you imagine
that you can do your job with a laptop by the beach,
it could be done elsewhere by someone else.
Will survive locally those services
that require interaction, networking, knowledge of language
and culture, that are regulated, and that require physical
services (like medicine). Anything that can be done
remotely is at risk - so if you imagine that you can
do your job with a laptop by the beach, it could be
done elsewhere by someone else.
One of the interesting conclusions of your article
is the mapping of the services migration - globalisation
in BPO and high and middle knowledge intensive jobs
are language oriented
While it is not a hard rule, the "geography"
of services is linguistic and cultural. Language barriers
are more relevant that oceans, mountains, and political
boundaries with customs officials. So one can migrate
to a different world by learning a language. In technical
subjects, the language may be Java, fluid dynamics,
or CAD/CAM. A very creative option is to target a country
(like India or Russia) and to work at developing a special
relationship with them over time. I doubt that most
countries will do this, but I can cite some examples.
Some Israeli companies have hired foreign talent to
work for them based in Cyprus. There are a couple of
examples of Indian engineers based in the West Indies
(easy access to the US).
In your paper you mentioned the three main world
languages - English, Spanish and the Chinese. The globalisation
of services follows the language footprints of the English
and Spanish-speaking countries. You didn't mention the
French and the Portuguese speaking world. Why?
I didn't forget Portuguese or French. It is just that
the distribution of demand and supply is different in
different worlds. In English there are 300 million wealthy
people and perhaps 100 million very poor (but capable)
people. In Spanish, there are 40 million wealthy people,
and 300 million who are less wealthy. So the pattern
of what is demanded and what can be supplied will be
Portuguese has its own pattern where Brazil may outweigh
Portugal for both demand and supply. Unfortunately,
ex-colonial masters are often reluctant to work with
their colonies. So one of the big failures in the English
world is that the UK could not yet capitalize on their
primary contacts with India - it may happen yet, but
the contacts with the US may be winning.
Can you detail more global services examples - than
the famous Bangalore Case, in India - of taking profit
in the language footprints?
Many examples even in the English case. The largest
call-center operator for the US till 2002 was Australia
(today India). The largest supplier of content management
services for US is Ireland (tomorrow?). Many companies
in the US looking at the Hispanic market (the world's
second biggest language), go to Chile for help; many
Spanish firms outsource to Latin American countries.
France goes to Mauritius and North African ex-colonies.
Germany to Poland and Czech, Sweden to Estonia.
Even China in certain emergent regions are challenging
the idea of linguistic concentration. As Singapore did
with the English, Chinese strategists are doing the
same. Can China turn in the second half of the 21st
century a big global player in the information-based
Very much so in technical areas, not so much in service
areas. Even in the US, one can see that new immigrant
Chinese are more visible in manufacturing and technology
than in services. One has to also remember that many
technical (like imbedded software) and B2B services(like
commercial banking) follow manufacturing and China will
capture those. Automation in services is also a possibility
since hardware is involved (e.g. ATM's, or intelligent
home appliances). But as China is successful in manufacturing,
and as its standard of living rises, it will not want
to provide low-end services.
What should also be remembered,
is that the developing countries themselves also present
large and growing markets for all kinds of services.
Globalisation of careers of western high and middle
knowledge jobs will be a serious trend? This high and
middle rank people has to adapt to "global mobility"?
Can they have career opportunities in the geography
Think about which English, French, Portuguese and Spanish
people went to the colonies to make their fortunes?
They were the adventurers and the less comfortable.
If someone already has a good job in a wealthy country,
why move? The modern adventurer is the business entrepreneur
and the manager from a start-up company. But remember
that the people in the "colonies" are not
helpless or backward
natives any more. And going from the US to China or
India just leads to a high cost person in a low cost
country. What is much more likely is a two way flow.
There is already a huge brain drain from India, China
and the Philippines to the US and other countries. So
the picture will be complicated. What should also be
remembered, is that the developing countries themselves
also present large and growing markets for all kinds
Are you preparing a book about this matter? What
will be the next steps in your research in this matter?
Yes I am in the process of writing a book. We are developing
extensive research into these topics, and are working
with research partners world-wide. The research includes
a survey of current business practices and also investigations
of changes in major sectors like financial services,
media and entertainment, retailing, consumer appliances
and business services. Our research partners already
confirmed are in Italy, Germany, Sweden, France, Spain,
India, Korea, Japan, Chile. In discussion: UK, China
and Argentina. To come: Russia, Indonesia, Thailand.
We have no partners in Brazil and Portugal.
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