Outsourcing Poverty

While international aid for economic development often fails, business has the potential to bring millions of people out of poverty. For no enterprise is this more true than the unsung $300 billion industry known as Business Process . 

Business Process Outsourcing, often referred to Outsourcing by the acronym BPO, means contracting business functions to third-party service providers. While call centers are the most visible part of this industry, BPO also includes many types of back office processing. 

A back office is a part of most corporations where tasks dedicated to running the company itself take place. The term "back office" comes from the building layout of early companies where the front office would contain the sales and other customer-facing staff and the back office would be those manufacturing or developing the products or involved in administration but without being seen by customers. Although the operations of a back office are seldom prominent, they are a major contributor to a business.

Back offices may be located somewhere other than company headquarters. Many are in areas and countries with cheaper rent and lower labor costs. Some office parks such as MetroTech Center provide back offices for tenants whose front offices are in more expensive neighborhoods. Back office functions can be outsourced to consultants and contractors, including ones in other countries.

This industry largely operates invisibly for consumers in North America and Europe. However, the sector employs several million people worldwide - primarily in India, the Philippines and China. In India, the industry has grown from 1.2 percent of GDP 1998 to 6.4 percent in 2011 -and has created more than 700,000 jobs in the Philippines.

While some make the case that outsourcing is just another industry chasing lower wage rates, I've seen something different. In 2001, a former McKinsey consultant named Jeremy Hockenstein posed the challenge to me of creating BPO jobs for the poor in the developing world. From my perspective at the time, working at a Silicon Valley venture capital firm, the idea that the BPO industry would employ poor people in a country like Cambodia seemed crazy. 

However, Jeremy was struck by the talented and skilled youth in this very poor nation, a country still recovering from genocide - and the challenge they faced finding work. He proposed to play jiu-jitsu with the forces of global business and technology, and he started a BPO firm in Phnom Penh, which he called Digital Divide Data. 

A venture capital firm Global Catalyst Partners, contributed $25,000 in philanthropic seed capital. Two Cambodians learned how to manage the business from a firm in Delhi. Jeremy purchased computers and rented a storefront on a dirt road in Cambodia's capital, Phnom Penh.