Wendy Gonzalez is the CEO of Sama, the provider of accurate data for ambitious AI.
Outsourcing specific parts of a business to save costs or take advantage of differing tax laws is nothing new—it’s been happening at least since the 1960s. By targeting college graduates in other countries, companies could save on costs, creating a new industry as a result: business process outsourcing. Since the ’60s, though, the world has become more cognizant of how to serve more than just one bottom line—and make communities better.
This new business practice is called impact sourcing. Per the Rockefeller Foundation (full disclosure: my company was previously a grant recipient of the Rockefeller Foundation), it’s best summarized as “employment for high potential but disadvantaged people in the services sector.” At the beginning, this was often targeting communities for microwork, or tasks that don’t require high language skills or prior education to complete. Now impact sourcing encompasses both traditional BPO fields like customer support or even high-tech work like AI data annotation or curation.
Impact sourcing as a whole provides benefits to the people hired for this work by moving them into the formal economy, which comes with more than just a steady wage. (Having a reliable source of income itself can be a major benefit, particularly for those living below the international poverty line.) It allows for having the ability to save for retirement, receive health insurance and more significantly improve not just an employee’s life, but the lives of their family and even the community they live in through the ripple effect of more money being spent locally.
Impact sourcing has been growing for the past 15 years, but it’s still in its beginning phase of growth. Just over half of the executives (download required) Deloitte surveyed in 2022 indicated that they used BPO. They found that 76% of that outsourcing is for IT functions, and 89% of companies are deploying cloud services with third parties. The market value is in the hundreds of billions. By comparison, the number of impact sourcing employees is around just 350,000 globally.
Faced with the choice to join a massive global market or intentionally go with a smaller, growing industry, why might you choose to go with impact sourcing? There are three reasons—and one challenge—I’d like to share before you decide.
Social Responsibility Goals
Slowly but surely, companies are adopting ESG (environmental, social, governance) practices. Even one of the biggest companies in the world, Apple, has been recognized for its ESG leadership. Often, companies look to the UN’s Sustainable Development Goals for ideas on which goals to implement or focus on; about 25% of the Fortune 500 companies refer to the SDGs in some way. Companies like Logitech and GE HealthCare have joined the UN Global Compact, designed to advance these goals locally and which requires progress reports annually. (Sama is also a member of the UN Global Compact.)
Impact sourcing can offer direct, measurable contributions to these goals, starting with the very first SDG: No Poverty, thanks to improved wages and benefits. Companies practicing impact sourcing can quickly realize results and improve their internal KPIs while also contributing to a global movement—one that could create up to $12 trillion in additional business opportunities.
High Performance, Low Attrition
Impact sourcing companies operate in countries that have huge, untapped talent pools. It’s essentially the founding principle at my company: talent is equally distributed, but opportunity is not. For example, the youth unemployment rate in Kenya is 13.4% as of 2022. As the Rockefeller Foundation points out, it is similarly high in a number of other countries with impact sourcers, like India, and impact workers “exhibit high motivation levels that leads to improved performance over a period of time and lower hiring and training costs.”
As that same research indicates, attrition rates are anywhere from 15%-40% lower in impact sourcing than normal BPO. (Everest Group, meanwhile, has seen a 50% attrition reduction in some cases in South Africa.) Consequently, working with an impact sourcing company could result in a more experienced workforce handling your business operations. For example, reduced customer satisfaction when outsourcing customer support functions is a key concern, but may be mitigated by a more experienced team trained at an impact sourcing company.
Better Cost Savings
One of the key drivers, if not the singular key driver, of BPO as an industry has always been reducing how much companies spend. Impact sourcing, however, takes this to the next level.
Take India, where BPO is still growing at a projected CAGR of approximately 11% through 2028. As the Rockefeller Foundation research points out, impact sourcing that prioritizes bringing work to more rural areas or other shifts can help realize cost savings of 35%-40% compared to the traditional model. Much of India’s population is still rural, so the cost savings could also lead to finding hitherto untapped talent—and an outsized impact on the communities that impact sourcing companies choose to work in.
Picking The Right Partner
Once you’ve decided to practice impact sourcing, the top question is this: How do you choose the right partner to reap all of these benefits?
First, of course, you can ask for customer references directly from a potential partner. Customers work intimately with these partners and have an inside view as to what operations are actually like.
Third-party validation is also a great way to determine whether or not an impact sourcing partner fits with your company values. Is the impact sourcer open to audits by third parties to ensure they are paying fair wages, for example? Furthermore, an impact sourcer who is doing what they say they are should have no problem sharing details with you about their business practices, even if they don’t necessarily publish an impact report. If a potential partner is not transparent to your liking, then they may not be the best fit for you. We want to naturally trust that people are working toward good things, but it is better for both your business and your ESG goals to verify as much as possible before you complete an agreement.
Finally, there are also many external, informative sources that you can leverage.
Ultimately, whether or not your company chooses to practice impact sourcing, it’s undeniable that this is a growing industry. But unlike BPO, I believe it’s better for more than just your bottom line as a cost-saving measure: it’s meeting a need for businesses to take action and commit to social responsibility.
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