EMERGENCE NEWS

The Inside Story: EMERGENCE Case Studies

Jörg Flecker, Sabine Kirschenhofer, FORBA

		In 2001, the EMERGENCE team carried out 62 case studies in 17 European countries. Each case involved transregional or cross-border relocation of eWork from a ‘source’ to a ‘destination’ location and was based on several qualitative interviews in each of the investigated companies. The results of the EMERGENCE 18-Country Employer Survey were used to guide the choice of cases to ensure that they represented the general European picture, with an emphasis on cases involving a significant number of on-site employees in which the role of information and communications technologies (ICTs) was critical for the functioning of the remote working relationship. The cases covered all the seven generic business functions that were identified at earlier stages of the EMERGENCE project and spread across a wide range of business sectors but, because these were the most important functions identified in the employer survey, the largest numbers of cases involved telesales and customer service functions, and software development and IT support functions. The sample covered both outsourcing and in-house relocation, and consisted of a balanced mix of transregional and cross-border relocations, including eight transcontinental relocations.
Jörg Flecker FORBA
Sabine Kirschenhofer FORBA

Background and objectives of relocation

Media stereotypes often present a picture of a ‘race to the bottom’ in which call centres or software development units are moved to regions with low wage costs. However, it is clear that the search for cheap labour is only one of several different motives for delocalisation. Often the objective may be the expansion of existing activities, or the development of new activities at another location. In addition, many relocations do not take place as isolated measures, but arise from the reorganisation of a major group. Surprisingly, geographical relocation is not always the initial aim; it may only arise incidentally as a consequence of outsourcing to another company. From the case study findings a more differentiated picture emerges showing eight types of relocation of eWork:.
 

Fig 1: Eight types of relocation of eWork

Background/cause: Company reorganisation Isolated measure Primary objective: Concentration (reduction) Decentralisation (expansion) Complementing (expansion) Replacement (reduction) Geographical relocation I III V VII Outsourcing II IV VI VIII

Source: EMERGENCE European Survey (IES/NOP)

As a rule, the various types of relocation correspond to different motives. Thus in geographical concentration, expected cost savings achieved by economies of scale play a dominant role. In isolated measures, by contrast, the availability of labour, expertise and cost differences may be the most important motives. Despite the views of many commentators on the ‘information society’ these case studies show that restructuring does not necessarily lead to dispersed work. Quite often relocations come about because activities are to be concentrated in order, for instance, to optimise the size of operations in one particular place. Even where this a high level of mobility of eWork, it cannot be concluded from the EMERGENCE company case studies that the thesis of ‘any location will do’ applies. On the contrary, it is precisely the delocalising potential of new ICT that makes the specific characteristics of locations even more important. 

The Relocation of the Customer Service Function

‘Personnel shortages’ or a high turnover in call-centre operators can be identified as a major regional push factor and motivation for the relocation of customer service operations. Sometimes the shortage of operators can arise from the concentration of too many call centres in one region. This increases competition for staff between call centres, which in turn leads to high labour turnover. However, these high turnover rates are also due to the often very monotonous and standardised nature of the work. Metropolitan areas can often rely on a larger pool of potential operators with the suitable skills (different foreign languages) and availability (flexible working hours). At the same time, the location of many call centres in these urban areas can lead to intense competition for staff and operators becoming a scarce asset. While rural areas are attractive call centre locations because lack of alternative employment opportunities ensures low staff turnover, they offer limited resources in terms of the amount and profile of available operators: rapid staff growth in times of expansion is sometimes not possible.

It becomes apparent from the example of the call-centre magnet Dublin, that even in the face of severe personnel shortages, many companies are unwilling to train the regional workforce, and that fresher meadows elsewhere are probably more attractive to the ‘butterflies’ than the strenuous improvement of the existing location. And it is precisely the high level of digitisation of information and the advanced standardisation of work processes developed for the delocalised call centres that can act as a facilitator for potential further relocations. This means that not only experience gained from previous relocations but also the very organisation of relocated work enhance the chance of a further change of location.

The relocation of the IT function

In Europe, major labour-market shortages in IT specialists have been diagnosed in recent years. Such shortages in local labour-market segments set limits on expanding activities and lead to increased turnover and wage costs. In the context of the EMERGENCE relocation cases in IT, the following core objectives or motives for relocation were found:

• labour-market-induced or -oriented relocation
• knowledge-oriented relocation
• relocation to reduce personnel costs
• centralisation to exploit economies of scale. 

The cross-border relocations of the IT-function include the delocalisation of eWork to India, to CEE countries, the US and to Siberia. In the cases studied, the considerable differences in personnel costs meant that overall cost savings were achieved despite relocation and management expenses. The extent of these savings varied greatly, however. With regard to the Indian cases, drawbacks arose from the comparatively high turnover of IT staff. The companies thus attempted to design the work so that it was attractive for the Indian software developers. From this it follows that it is not sensible to relocate just the simple (coding) work to India. Yet, on the other hand, the relocation of customer-specific software development is difficult since it requires more intensive interaction. It became clear that for successful relocation, a learning process related to forms of division of labour, formalisation of project work, communication and cultural aspects of co-operation is necessary inside the company.

Whether looking at the locations for software development in India or in Central and East European countries, the general trend goes towards upgrading new plants, in the sense that they are granted more independence and that more responsibility for whole projects is transferred to them. In India this has a lot to do with the labour-market situation. Recently, staff turnover has become an issue in the capitals of the central and eastern European countries, and the outsourcing strategies here are changing.

Organisational demands and consequences

The delocalisation of eWork puts considerable demands on organisations. Depending on size, age and corporate culture, a company’s organisational structure and work routines can either facilitate or hamper the relocation of work. Some of the case studies clearly showed that informal organisational and social aspects can be crucial for success. What seems technologically and organisationally feasible in the planning phase can in reality lead to considerable problems, if informal co-operation and soft issues (such as the perspectives of those concerned) are not sufficiently taken into account. Contradicting another popular image, relocations are rarely one-off measures. Rather, they are usually part of long-term or even permanent restructuring processes.

In the light of the EMERGENCE company case studies, the following organisational facilitators seem to be the most important:

• existing contacts with and support from parent or partner companies
• clearly delineated tasks or projects, a high degree of standardisation and formalisation
• workers’ involvement in the preparation of the relocation
• adaptation of work organisation and technology to the new environment
• organisational change at source in order to adapt to the new division of labour
• dedicated and extensive efforts regarding knowledge transfer and training.

In most cases, the relocation of eWork results in more or less intensive co-operation between the source and the destination companies or establishments involved. While this is quite obvious for the types of decentralising and expanding relocations, also the concentration of activities at one location usually implies changed but ongoing interrelations between, for example, centralised IT or customer service units and dispersed subsidiaries of the company. Hence, successful delocalisation of eWork is considerably shaped by a climate of co-operation and trust between the employees at the source and destination locations, and continuous knowledge and information transfer. Such a co-operative atmosphere is (in most cases) created if those concerned at the source location were actively involved in the decision-making and relocation process and if the relocation did not lead to a threat to jobs and a cutback in the content of work.

Another general picture that emerges from these experiences is that relocations that create or intensify co-operation over distance trigger organisational and technological change processes leading to higher levels of formalisation and digitisation of information and communication. The core aspects of this change relate to the transformation of tacit experiential knowledge into explicit knowledge and a shift towards comprehensive documentation and thereby digitisation of information relating to customer contacts, products, projects etc. Nevertheless, in most cases companies are convinced of the necessity for regular face-to-face meetings in order to ensure sufficient information transfer and to create an atmosphere of trust. Quite the reverse of the much rumoured death of distance in the ICT-dominated new world, the case studies analysed here reveal a number of efforts to minimise the adversarial effects of physical distance between people.

Employment aspects

Two types of relocation result in job loss at the source location: concentration of activities in the context of company re-organisation, and replacing relocations as isolated measures. Some of the relocations studied involved a considerable number of jobs. The reduction of jobs at the source location did not lead in all cases to redundancies, however. Some employees were transferred to other jobs in the company, others were offered a job move to the new location. When there were redundancies, negotiations on the terms were frequently made that partly led to social plans regulating severance pay etc. Conversely, some of the ‘destination’ locations showed rapid growth, leading to expanding employment opportunities in the local labour market for IT specialists, call centre agents or other types of ‘eWorkers’.

At the outset of the EMERGENCE project we conceived of relocation of eWork as a movement of tasks or jobs, with workers at one location losing and workers at another location gaining particular jobs or even employment. What we certainly underestimated was the movement of people involved in the relocation of eWork. Relocations put high demands on people’s mobility; this can be the direct consequence of relocation insofar as workers have to move with their jobs if they want to keep them. In addition, companies relocating call centres often motivate employees to move to the new location to support the knowledge transfer. But there is a lot of additional mobility required: managers go abroad to set up and direct new units or companies; specialists train new workers at new locations; people co-operating over distance travel to regular meetings etc. In the light of our case study findings, the popular image of eWork bringing the work to where people live instead of people having to commute to work doesn’t apply in many cases.

There are several reasons to assume that relocated eWork offers less stable employment than comparable workplaces. First, the reasons for locating work in a particular region may vanish (be it labour market situations or relative cost advantages); second, the very economic processes and corporate strategies that led to the relocation may lead to further reorganisations threatening the employment created through relocation; and third, organisational and technological change necessary for relocating eWork, result in work organisations and information systems that make work easier to relocate. Thus it can be concluded that the butterfly is not likely to settle for good, both because the conditions keep changing and because fluttering from blossom to blossom becomes easier every time.

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