Article Title: Can Lebanon position itself as a global digital outsourcing destination?
Published on: Spring 2021 by: Thomas Schellen
There are occasions where it is hard to walk a mile in another person’s shoes in order to understand and not judge them – simply because the shoes of the other stand under a very distant bed. In the outsourcing scenario this observation is fitting. For a unionized worker in the US state of Georgia (not that there would be high shares of unionized workers there – a political candidate would statistically have to shake 15 employees’ hands before meeting one union member) the concept of outsourcing might easily convey an existential threat of job loss that means economic despair and social bleakness for her and her children. For a young knowledge worker in the Transcaucasian country by the same name (but with roughly 7 percent in nominal GDP when compared to the US state), the concept of outsourcing by contrast might flag a personal economic hope to score an outsourced job. She or he would enjoy the opportunity of capturing a slightly larger slice of the global income pie.
In this context of globalized competition for jobs among legally and socially very differently positioned and physically dissociated labor markets, outsourcing in the late industrial and information age has acquired an ambiguous flair depending on how and from where one looked at it. From the Lebanese perspective the idea to attract outsourced ICT services jobs such as call centers, which was theorized at some points in the reconstruction and development era around the turn of the millennium as natural opportunity for multilingual Lebanese providers, was hampered by the disadvantageous cost and unreliable access to required communication infrastructures. Another barrier against applying the outsourcing model locally was the in comparison with Asian outsourcing destinations noncompetitive cost of Lebanese human capital in the dollar-pegged country. But things are very different now. Outsourcing, once a practice of manufacturers which notoriously externalized not only parts of their supply chain to low-cost industrial locations but also their social obligations, has become services oriented. Business process outsourcing (BPO) is something that the economy-hugging folks at Investopedia neutrally describe as “a method of subcontracting various business-related operations to third-party vendors.”
THE EVOLUTION OF OUTSOURCING
Advanced from early-globalization era manufacturing practices, the application of BPO in services industries has become diversified. It furthermore appears to be in the process of emancipating itself from the seesaw of inconclusive zero sum economic logic, by which the job gained in one new manufacturing location is the job lost in an established center of industry.
Instead of just a job being replaced by just another job – at best a questionable temporary gain in the age of rising AI and automation – the emerging paradigm of outsourcing could become a new non-zero-sum employment play as a huge range of digitally interconnected, complex jobs are globally realigned on a socially aware global playing field.
This implies that outsourcing is maturing into well-regulated and strategic digital outsourcing, a globalized application of the fundamental economic behavior of relying on division of labor for improvement of productivity. This incarnation of outsourcing comes with the promise and necessity of compliance with both productivity optimization objectives and high ESG standards, and lately also involves strategies of inclusiveness and social justice for disadvantaged groups.
Naming digital outsourcing as a specific opportunity in the context of new tech entrepreneurial and knowledge enterprise developments at the focus of the fifth roundtable organized this March by Executive Magazine in partnership with the United States Agency for International Development, it was prudent for Executive to investigate if the economic play of digital outsourcing is demonstrating a specific potential for Lebanon in context of the national convergence of economic need of underemployed or unemployed professionals, a current if temporary comparative edge owed to the depreciation of the Lebanese lira, and an ongoing trend of proactively tapping into the diaspora and their wider economic networks for creation of economic opportunities for remote professional work from Lebanon.
A practical example that is currently seeking to prove this proposition of creating a digital outsourcing destination identity in Lebanon is the Lebanon Outsourcing Initiative (LOI) launched by the platform Bridge. Outsource. Transform. (B.O.T.). Launched this year by its young parent B.O.T. – a startup company of 2018 vintage that saw very strong revenue growth in the crisis year of 2020 but has yet to write profits – LOI is a directory of outsourcing services that Lebanese providers of such services – individual freelancers and small enterprises – can enroll in, says Charbel Karam, development and marketing manager at B.O.T.
“We took some of our expertise in outsourcing and put it into the Lebanon Outsourcing Initiative. We knew that the need existed for companies and freelancers in Lebanon to acquire clients from abroad. [We] also knew that we could access the Lebanese diaspora across the world. So we created an action plan for Lebanese diaspora to engage with service providers and freelancers in Lebanon,” he tells Executive, emphasizing that the reason why B.O.T. launched this initiative at the beginning of January 2021 was “to give back” to the community in Lebanon.
Marianne Bitar Karam, managing director of B.O.T., describes the LOI directory as a campaign that evolved from a marketing idea for the company into a wider effort of trying to attract attention to SMEs that provide services – which differ from B.O.T.’s portfolio – under the common theme of Lebanon as outsourcing destination. The company, which is supported by social enterprise builder Alfanar and the Lebanese International Financial Executives (LIFE) network, took the initiative of developing the website and starting to populate it with names of services providers after setting up a publicity campaign anchored on a video that features actress Zeina Makki.
“We consider it as a directory of services. Client companies who want to use a service that B.O.T. does not provide, can find [this service] from the website. We do this out of empathy with the Lebanese economy and did not want to do it by ourselves,” Bitar Karam says. According to her, the initiative for the time being is a standalone marketing activity of social enterprise B.O.T and not incorporated as a separate enterprise, which means that there is no vetting of providers or broking of services of the listed providers by B.O.T. All due diligence and negotiation over provision of services is done directly between the directory listed Lebanese provider and the client who seeks the service, she confirms.
The website of B.O.T. and the services directory by LOI share their base domain (https://letsbot.io/ and https://loi.letsbot.io/home) but the list of categories in the directory goes significantly beyond the seven digital service categories offered by B.O.T., with the latter extending from AI training data and data management to transcriptions and market research.
There is no financial fee or revenue sharing between B.O.T. and entrants in the LOI directory, says Charbel Karam. LOI is an activity that does not generate any income and the intention is to keep it this way. “Today this is an activity by B.O.T. As we develop further into future, we might change its legal status into something more incorporated and get the conversation going. In the future it might become transactional, or adbase or free and subsidized and funded by organizations. We don’t know but we definitely hope that it continues to be free of charge,” he says.
The funding journey of B.O.T. since 2018 entailed financing support by UNICEF, which has now ended, and current funding commitments by Alfanar that entail technical assistance and also have allowed the enterprise to set its sights on expanding into Jordan.
Current projections for reaching a breakeven point should be discussed at the end of this year, adds Bitar Karam, who hopes that success in this year will demonstrate that B.O.T. can access markets and attract international clients. “Today our priority is to prove that our model is scalable abroad,” she says but after achieving such milestones the company would seek to attract investors in the following two years of 2022 and 2023.
With B.O.T. still in its early stages, its ability to prove the value proposition of Lebanon as digital outsourcing destination has still to be tested in the new economic realities of a changed global labor environment but Michelle Mouracade, the Lebanon country director of Alfanar, never tires of advocating for this proposition. She points out that B.O.T. saw a 230 percent revenue increase between 2019 and 2020 and asserts firmly, “We believe that Lebanon can become an outsourcing hub.”
GROWING NUMBERS AND PROPOSITIONS
In Bitar Karam’s and Charbel Karam’s view, the proposition will, however, require governmental support “on all levels” from revision of taxation schemes for freelancers that agree to formalize their activity and adoption of a tax formula that is suited for the building of social enterprises to infrastructure improvements and support of outsourcing initiatives by the Ministry of Foreign Affairs and Lebanese embassies.
On the upside of the aspiration of elevating the country to an outsourcing destination, the social enterprise angle of the Lebanon Outsourcing Initiative could contribute to attracting currently untapped investments from the growing global pool of impact investment funds that prioritize ventures which aim to provide economic opportunities for marginalized groups and disadvantaged communities, and measure the impacts they have in this regard, adds Mouracade, who also addressed this topic as participant in the Executive-United States Agency for International Development (USAID) roundtable on tech entrepreneurship and knowledge enterprises.
As noted at the tech roundtable but also at preceding roundtables, the past year’s indications of the increased job engagement with the diaspora and remote work angles cannot be expected to last. The tremendous labor cost advantage under the depreciated local currency scenarios of lira and lollar is already being eroded by demands of creative workers to be compensated in hard currency for their remote services. Outsourced labor to Lebanon will have to adjust its remuneration demands upwards in predictable alignment with the real exchange value of the work done here.
The remote working propositions of outsourcing will (as will every proposition of long distance employment contracts from Lebanon) more importantly need to be embedded in a social arrangement of long-term safety of such work and satisfactory social insurance, which is a tall but inescapable order for the next global social contract and stabilization of Lebanese life. By today’s visibility, the aspiration for creating the outsourcing destination Lebanon appears to open an attractive but temporary window of opportunity that calls for initiatives to urgently commence and anticipate growing impacts. “The more we have private initiatives [in ICT and tech entrepreneurship] and the more we work together, the more we can change the image of Lebanon and get support from the government,” says Bitar Karam.