This article by Andrew Bibby, in a slightly different form, was first published in Flexible Working, August 1997

Andrew Bibby: Offshore Information Processing in Barbados

Information processing is becoming a globalised industry. With the coming together of information technology and telecommunications, work which involves the manipulation of digitised data is becoming footloose. Companies can, if they choose, relocate this sort of work away their traditional centres to whatever part of the world offers competitive advantage.

This is the theory. In practice, it can still come as something of a surprise to stand, for example, in a large data processing centre close to the harbour in Bridgetown, Barbados, and watch one of the women employees there work on a document headed, 'National Rivers Authority: Anglian Region'. Outside, the Caribbean sun shines high in the sky. Inside, the air conditioning keeps the temperature down as text is prepared for publication for one of the British publishers who now outsource work to Barbados - but don't necessarily even realise that they do.

In this particular example, the company involved is the Offshore Keyboarding Corporation, part of a larger Californian-based company Digital Imaging. It employs about 300 employees in Barbados and, as its name suggests, is one of a number of companies which engage in what was originally known as offshore data entry but is now probably better described as the offshore information processing industry.

The term 'offshore' itself may now be a little misleading, even though island states do figure prominently in the list of major players. In the Caribbean, Barbados and Jamaica both have an information processing sector which goes back to the early 1980s (and arguably in embryonic form even to the late Sixties), and which in each case provides work for several thousand people. There are smaller operations in the Dominican Republic, Trinidad and Tobago, Grenada, St Kitts and other Caribbean islands.

In global terms, the Philippines is ranked first in the market for remote data entry, according to a 1992 study funded by the World Bank. Increasingly, however, low-level work is migrating to mainland China. Other countries competing for this work include Korea, Malaysia, Mexico, Sri Lanka and Mauritius.

For many businesses, the idea of taking information work 'offshore' remains just that - nothing more than an idea, to be bandied about either as a threat or promise, depending on the occasion and the need. Whilst the rhetoric suggests that this sort of relocation of work is a central part of the emerging so-called information society, the actual process of transferring work to a developing country where political and legislative frameworks may be very different and where infrastructure (including telecoms) perhaps less state-of-the-art clearly needs careful thought.

This article is designed to provide some hard facts to complement the rhetoric. It focuses on one particular country, Barbados, and looks at the opportunities both for in-house and outsourced information processing there. Whilst other sectors (including tourism and agriculture) contribute much more to Barbados's overall economy, information processing is one of a small number of developing industries which the Barbadian government, and its Barbados Investment and Development Corporation (BIDC), have identified as of growing strategic importance. Currently, the sector provides work for about 2500 people, 2% of the working population.

The economic force which drives businesses offshore is clearly the lower cost of labour which can be found there. In Barbados, for example, the BIDC estimates that labour costs are a third of those in the USA and a quarter of comparable Canadian rates. According to the BIDC, the typical hourly rate in US dollars for a skilled data entry operator is between $2.50- $3.25 an hour and for a trainee $1.75-$2.25 an hour. These figures can be compared with those quoted in a recent trade union report on Caribbean information processing, which contrasted Barbadian data entry hourly wage rates ($2.00-$2.88) with those in the USA ($7.00-$8.00). Direct comparisons with UK wage levels are not offered, but the overall message is clear.

As people on the island will quickly point out, however, Barbados is not a cheap location in offshore terms. Wage costs in other Caribbean islands are lower, perhaps by as much as 50%: the trade union report quoted above gave hourly data entry wages in Jamaica, for example, as $0.80-$1.00 an hour. And for the lowest costs of all, businesses are increasingly looking to take text entry and keyboard work to the People's Republic of China.

Barbados's central pitch for business, therefore, stresses other factors. According to Lawson Nurse, Chief Executive Officer of the BIDC: "Barbados' competitive advantage is derived from four major factors: i) High productivity levels, arising from a skilled and easily trainable labour force ii) State of the art communications system, which is being further modernised iii) Social, political and economic stability iv) Business and physical infrastructure which work." [Information Services in National Development Strategy, Lawson Nurse 1996]

Put another way, Barbados is trying to position itself as high up the value chain as possible, away from the very low-skilled end of the business. The country is proud of the resources it devotes to education, and claims a higher literacy rate than many developed countries.

In Lawson Nurse's own words: "Barbados is not a cheap labour destination in which to do business. Given the current level of our development and the niche markets which we have secured, I would say that our closest competitor today is probably the Republic of Ireland". Whilst there is perhaps a deliberately provocative element to this last remark, the comparison is not necessarily inappropriate.

So what sort of information processing work is actually going on at present in Barbados? Since it has already been mentioned, Offshore Keyboarding may be an appropriate place to start.

Digital Imaging, the parent company, is a good example of a business which has learned to take advantage of the global market in information processing work. The company's head office is in Anaheim, California, and indeed the business began life undertaking data entry work entirely from within the United States. However, some years ago it moved much of this work offshore. As well as its centre in Barbados it has facilities in Grenada, in the northern Mexican town of Cuidad Obreg"n and in mainland China.

The low labour costs in Mexico, and especially China, means that data entry work which was formerly undertaken in Barbados is now relocated there. In the case of China, it is cost-effective to arrange for the same text to be input by two, or even three, workers, with their versions then compared to identify errors. Quality assurance is undertaken in Barbados. "What's happened in this business is that keyboarding in Barbados is not competitive," says Digital Imaging's senior vice president Shane Lynagh. "The low-end jobs are going away, the high-end jobs are increasing."

Digital Imaging is engaged in three overlapping markets. It undertakes data entry work, typically processing transaction records for courier services such as FedEx and UPS. It is involved in database development work, converting paper records into electronic formats. It also undertakes work (such as marking up text ready for multimedia printing using the standard SGML codes) for publishers. It is in this last area where it has had most success in finding outsourced work from Britain. According to Shane Lynagh, British and European academic publishers who outsource work to the Offshore Keyboarding operation in Barbados include Oxford University Press, Elsevier and Macmillan. Offshore Keyboarding has a London-based sales agent to develop this market further.

The company particularly specialises in technical and scientific publications, which may involve complex typesetting of formulae. Interestingly, this is a market which has also been identified for outsourcing to the Scottish Western Isles (see Flexible Working, March 1997).

Shane Lynagh is bullish about the prospects for his business, pointing to the almost unlimited opportunities of 'back conversion' (the digitisation of existing paper-based records). But some in Barbados, including the Barbados Workers' Union, are concerned that - like other US companies undertaking information processing - the company has no particular loyalty to the island and could if it chose relocate at will elsewhere. There is already an unhappy precedent, in that Digital Imaging pulled out of an operation it ran for a time in the neighbouring island of Dominica.

The variety of work undertaken by Offshore Keyboarding demonstrates that the information processing industry in Barbados is not engaged in one uniform type of data entry. BIDC estimates that there are 36 information services companies operating on the island, of which six employ over 100 people. The work undertaken varies widely, from relatively low-skilled operations (such as keyboard inputting) to more skilled tasks (such as processing and authorising insurance claims). The BIDC offers this list:

Insurance claims processing Transaction processing services Software development CAD Database management Litigation support services Inbound/outbound telemarketing Data entry and fulfilment Pre-press operations Imaging and OCR application Typesetting

This is partly based on existing operations, and is partly also a wish-list. Perhaps surprisingly, there is little evidence yet of any growth in telesales or telemarketing, though one Australian computer company is expected to open a customer service centre for the north American market shortly.

It is BIDC policy to locate most of Barbados's information processing operations in the Harbour industrial park close to Bridgetown, which has been equipped with fibre optic cabling and a microwave link to the island's main ground station. The Harbour is home to Caribbean Data Services, the longest-established and largest company in the sector, which employs over a thousand staff. CDS was originally established by American Airlines to process data taken from the airline's issued tickets. It is still a subsidiary of American Airlines' parent company but has diversified into other work including insurance claims processing and accounting work.

Manulife, the Canadian-based insurance company, has a long-established subsidiary office nearby which undertakes insurance claims processing. (This sort of back-room operation, an important but labour-intensive part of an insurer's administrative work, can also be found in a number of centres opened by north American insurance companies in the west of Ireland.)

NDL, a subsidiary of another large American company the database marketing firm R L Polk, has also been in Barbados for many years. Currently based at Wildey, near Bridgetown, its three hundred employees process data on consumers' shopping habits and lifestyles voluntarily returned by consumers on guarantee and warranty cards. According to NDL's Karen Cominiello, its Barbados employees average 13,000 keystrokes an hour, at 99.98% accuracy. Among the reasons she lists for NDL's choice of Barbados are: "English speaking, politically stable, high literacy rate, large labour pool, good infrastructure and strong work ethic".

The Barbados government and the BIDC have their highest hopes riding on a relatively new business arrival on the island, however. Total Technology Solutions Ltd (TTSL) is the first attempt to move still further up the value chain, to develop a software production company in Barbados. A joint US- Indian venture, TTSL is trying to recreate some of the success of the Indian software industry. Currently, most of its programmers are from India, although the company hopes to act as a catalyst so that Barbadians and others from Caribbean islands build up software skills. TTSL is also currently recruiting employees from the UK and Ireland, mainly via the novel if appropriate mechanism of the Internet.

It will be apparent even from this brief overview that, whilst British companies are outsourcing work to Barbados, it is mainly north American companies who are at present represented in the information processing sector. One senses a certain weary recognition among Barbadians that Britain, the old colonial power which for generations exploited the island's economic resources, has become preoccupied with its new-found position in Europe and turned its back on the Caribbean. Nevertheless, the BIDC recently opened a London office (based at the Barbados High Commission, in the heart of London's West End), in an attempt to reach British and European businesses. Its Business Development Officer there is Kenneth Campbell, who runs regular seminars both in the capital and in Manchester.

As with any agency concerned at attracting inward investment, BIDC offers a range of incentives. The most valuable of these incentives are summarised by BIDC as follows:

Special tax rate of only 2.5% on the profits of Information Services companies Full exemption from import duties on production-related equipment such as computers, etc Full and unrestricted repatriation of capital, profits and dividends Subsidized office space available for rental in well-planned industrial parks. Training grant schemes to subsidize the cost of worker training."

Training grants are typically available at 75% of the wages paid to employees during training, for up to eight weeks. Grants are also payable for retraining employees where new work processes are introduced, and (at 50% rebate) to upgrade employees from unskilled to skilled or supervisory work.

Barbados has a social security system very similar to Britain's, with the employer's national insurance contribution rate at present 9.75%. This pays, among other things, for sick pay for employees. The country's trade union legislation is also close to European models (although perhaps not to that of a post-Thatcher Britain), in that unions have recognition rights where more than half the workforce are union members. The Barbados Workers' Union has members in most of the major data processing centres, but so far has encountered resistance in achieving the recognition it says it is entitled to.

BIDC is instrumental in providing accommodation for inward-investing companies. It suggests that annual office rental rates (in US dollars) are in the region of $6.25 per square foot. Any British companies relocating will save on heating bills, but will need to bear the cost of air-conditioning in mind: BIDC offers a suggested annual figure of c $2.50 per square foot.

Unlike Jamaica, where some of the information processing companies are based in free trade zones, Barbados has currently chosen not to have a geographically-defined FTZ (although the government is considering this possibility for the future). Instead, a special 'Free Trade Zone' tariff (of 50% of normal international tariffs) is available for information processing companies on their external telecommunications, through an agreement between the BIDC and Barbados External Telecommunications (BET Ltd), a Cable & Wireless subsidiary. Nevertheless, anyone who has begun to take for granted the highly competitive telecoms market in Britain may find the telecoms charges from the island higher than they expect.

In its attempt to attract British business, the BIDC believes it may have a secret weapon. Next year's Barbados Information Services Conference (to be held in Barbados on 2-4 March 1998) is conveniently arranged just before the English test team play the Windies at the island's Kensington Oval. "Stay on for the cricket," says the BIDC publicity encouragingly.

Further details: BIDC, Barbados High Commission, 1 Great Russell St, London WC1B 3JY (0171- 580-6077). http://www.bidc.com

Offshore Keyboarding, 16 Bemish Rd, London SW15 1DG (0181-780-5810). Contact Charles Hazell. TTSL: http://www.caribsurf.com/ttsl

Sources for this article include:

• Information Services in National Development Strategy, by Lawson Nurse, publ BIDC, 1996
• Global Information Processing, by Swasti Mitter and Ruth Pearson, ILO, 1992
• Export Based Information Processing in the Caribbean, with Particular Respect to Offshore Data Processing, by Dennis Pantin, publ FIET [n.d., 1996?]
  
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