U.S. Firms Pick Up Pakistan’s Call for Outsource Work
Pakistan would be hard-pressed to make anyone’s list of best places to do business.
It’s poor and saddled with a history of political instability and corruption. The U.S. government has warned Americans to stay away because of possible terrorist attacks. Blackouts are common in big cities.
But John Armbruster is betting that Pakistan’s attributes -- including a large, low-cost pool of English speakers -- point to a brighter future.
He’s aiming to help the country carve out a piece of the lucrative outsourcing business dominated by its neighbor and longtime rival, India.
So far, the bet by Armbruster’s company, TRG Pakistan Ltd., is paying off. It recently branched beyond its main office in Lahore and opened a second office in Karachi, the nation’s commercial center. By year-end, TRG hopes to expand to 500 employees from 300 now.
“We blow India away as far as quality is concerned,” said Armbruster, the company’s director of operations. “The problem India has gotten into is that it has grown too fast.”
Throughout the developing world, call centers are old news. But Pakistan is just getting into the game after years of economic stagnation fed by political and religious strife, as well as a dispute with India that occasionally has erupted into war.
Pakistan’s border with Afghanistan became a battle zone in the U.S.-led war against terrorism. Buyers panicked and apparel exports plummeted. Investors went elsewhere.
But the Pakistani government, aided by the Bush administration, has launched an aggressive effort to get its economic house in order by reducing debts and privatizing state-owned utilities. Interest rates have fallen, along with electrical and telephone rates. The economy grew an impressive 6.4% last year.
Pakistan now hopes to capitalize on some of the qualities that propelled its much larger neighbor to the top of the outsourcing class.
Like India, Pakistan has a large number of educated English speakers willing to work for a fraction of U.S. wages. Operating costs are low, in line with other parts of South Asia.
To boost its appeal as a high-tech hub, the Pakistani government has provided a 15-year tax exemption on software exports, eliminated duties on technology imports and streamlined the investment process.
Last year, investors sank $1.5 billion into the information technology sector, boosting software exports to $50 million, said Tariq Ikram, chairman of Pakistan’s Export Promotion Bureau. “Pakistan,” he boasted, “has some of the cheapest IT costs in the region.”
For all that, though, muscling into the outsourcing business won’t be easy for Pakistan.
Rival nations are also eager to grab a piece of the multibillion-dollar sector. Dubai has set its sights on becoming a financial center. Mauritius, an island nation in the Indian Ocean, is hoping to become a disaster- recovery center for corporations. China is targeting software development.
“This is such a competitive market with countries aggressively positioning themselves,” said Paul Laudicina, an outsourcing expert at consulting company A.T. Kearney Inc. “Because of the digitization of data, low-cost telephone services can be provided virtually anywhere. You can shop around, going from Chile to Finland just on your computer screen.”
Despite recent improvements, Laudicina added, Pakistan still lags far behind many other countries on global rankings of three significant criteria: math and science skills, business environment and costs. In addition, he said, the country’s continuing political instability creates a “do not pass go” image for many investors.
Indeed, Pakistan’s outsourcing efforts were nearly derailed by the 2001 terrorist attacks.
When planes hit the World Trade Center, Armbruster was in Pakistan to set up a back- office operation for Align Technology Inc., a Silicon Valley producer of plastic braces.
Within days, Align’s share price plummeted because investors were worried that the company’s Pakistan branch would get caught up in the escalating battle against terrorism, according to company representatives.
When Align announced it was closing its Lahore office, Armbruster and other company executives decided to take over the operation. It eventually became TRG.
Armbruster, who had set up call centers for several large U.S. firms, was convinced he could make a go of it in Pakistan. Rather than persuade U.S. companies to shift their work to Pakistan, TRG decided to invest in or buy small North American call centers and help them outsource their business overseas.
The firm began by buying a minority interest in Alert Communications, a South Pasadena company that had been in the telephone-answering business for 50 years. Alert President Gary Blasiar said the arrangement had allowed him to enjoy the cost savings of an offshore location without the headaches of managing a foreign operation himself.
Blasiar acknowledged having some initial qualms about outsourcing his business to Pakistan, and his family and friends “certainly thought I’d taken leave of my senses.” But after making sure his life insurance was in order, he visited Pakistan and has returned half a dozen times since.
“I have never felt threatened,” he said.
For Blasiar, a big payoff is the skill level that he gets in Pakistan, where TRG hires college graduates to handle the telephones for about $6,000 a year. At least 40% of the firm’s employees have lived abroad, making it easier for them to pick up accents and vernacular speech.
While most of Pakistan sleeps, TRG’s spacious office in downtown Lahore is abuzz with telephone operators working for Blasiar’s clients. Their work includes taking messages for Glendale physicians, filling catalog orders for Lego toys and launching subscription drives for the Los Angeles Times.
Another benefit for call- center operators in Pakistan is the large group of young, educated women eager for employment. Although women have made great strides in this populous Muslim country, there are still many restrictions on female participation in the workforce, particularly in rural areas.
Hina Rizvi, a 28-year-old Pakistani woman who oversees Alert’s business in Pakistan, has been promoted three times and now oversees a department of 130 telephone operators, one-third of whom are female.
She didn’t plan on being a pioneer. But in big and small ways, she is challenging some deeply rooted beliefs. It’s not just that she is a manager, an unusual accomplishment for a woman. It’s also that she is a single woman working at night in an office filled mostly with men, a practice that many here consider dangerous, if not heretical.
Armbruster would like more women on his call-center staff, in part because he believes they are “better communicators.” But breaking new ground hasn’t been easy. TRG offers tours of the company’s modern offices for skeptical parents and spouses and provides bus service for female employees so they won’t be traveling alone at night.
“We’re challenging a lot of norms here,” Rizvi said.
Although Pakistan’s economy took a big hit after the 2001 terrorist attacks, there was an unexpected silver lining. As part of a global effort to undermine terrorist financing, the Pakistani government clamped down on the unregulated money-transfer businesses that were the primary funnel for money sent from abroad by emigres. That prompted a large flow of funds into the nation’s banks -- $4 billion last year and billions more expected this year.
Although much of that money flowed into the stock market and real estate, some also went into start-up companies, particularly in the technology sector.
Pakistani expatriates also began tapping into the improving economy back home. Two years ago, Bob Din, chief executive of En Pointe Technologies, wanted to cut costs at his struggling El Segundo computer firm. He initially considered India for outsourcing back-office functions, such as sales and service.
But Din, who immigrated to the United States in 1970, decided that Pakistan offered lower costs and a workforce that had better English skills and a more confident phone manner.
“In software programming, India is way ahead of Pakistan,” he said. “But in general business back-office work, people in Pakistan spoke well and understood the processes.”
Din established a relationship with an outsourcing company in Islamabad, Ovex Technologies, that now handles back-office operations for his company and a handful of other U.S. and European customers.
Shifting part of his business to Pakistan reduced costs enough that En Pointe Technologies is profitable again, Din said. He also believes that he is contributing “in a very small way” to strengthening Pakistan’s struggling economy.
“If you get the right education to people, that cures a lot of the problem,” he said. “But once people get educated, you have to have someplace where they can go to work. The U.S. really has to help them.”
