Samasource: Increasing productivity in the US while reducing poverty worldwide – is it possible?

A Ford insight in the context of the Fourth Industrial Revolution

While many economists are concerned that international trade aggravates inequalities[i], Samasource is proving that it is possible to increase productivity for companies in the US while creating income opportunities in emerging markets. The key to their success? A Ford insight in the context of the Fourth Industrial Revolution. The World Economic Forum characterizes the Fourth Industrial Revolution by the “convergence of breakthrough technologies (…) that are transforming productions processes and business models across different industries.”[ii] Every day the world becomes more digital and more connected, while physical barriers become less significant. Samasource is a nonprofit that understood this trend and embraced the international trade of digital services as its core business.  Founded in 2008, Samasource sources data projects from companies in the US, breaks them down into smaller components, and recruits and trains workers (mainly youth and women) in Kenya, Uganda, and India to complete these projects. Founder Leila Janah was inspired by Henry Ford’s assembly line. “Ford figured out a way to break down the making of an incredibly complex machine [the Model T] into small chunks that people with basic training could complete. He moved the Model T from the craftsman’s studio into the mainstream. The assembly lines of the future apply the same thinking to digital work.”[iii] Samasource’s clients include Google, Salesforce, and Walmart. The latest contracted Samasource to improve its e-commerce offer through machine learning via Product Classification. “Product Classification (…) is extremely data-intensive, as information is received in high volumes and various formats from a multitude of internal and external sources. Although algorithms can handle large datasets with relative ease, the scale, depth, and level of complexity of Walmart’s classification service requires human judgment and verification to ensure that the algorithms function consistently and correctly”[iv]. Samasource assigned a team in Nairobi, managed from San Francisco, to work as an extension of Walmart’s team. All parties considered the project a great success.

According to Accenture, outsourcing has become a major pathway for increased productivity.  Apart from lowering costs, outsourcing allows companies to focus on their core business and solves capacity issues[v].  Leveraging on this market opportunity, Samasource has expanded its business and employed over 9,000 workers, most of them in the developing world.[vi] On one hand, Samasource was praised for delivering high quality to clients and fighting poverty. On the other, it received a lot of criticism for outsourcing to emerging markets work that Americans could have done. As a response, Samasource has established work hubs in San Francisco and New York.

On the short-term, Samasource is focused on scaling its business through two key strategies; (i) online training, and (ii) advisory services offering. Created in 2013, Samaschool provides training on digital skills and gig economy platforms. In 2016, it provided in-person training for 187 people in the US, but reached 29,940 people worldwide through its online training[vii]. Instead of replicating its model in different regions, Samasource is increasingly advising other players entering the so-called impact outsourcing space. It has been supporting UN agencies and the International Rescue Committee on their projects to improve livelihood opportunities for refugees in the Middle East and East Africa. These two initiatives helped Samasource break-even in 2016[viii].

On the medium-term, more and more competitors are entering the (impact) outsourcing space, with different business models. While Samasource has an impactful but expensive model, in which it establishes its own brick and mortar delivery centers, provide extensive training, and employ people full-time despite the workflow of projects, many companies are providing online freelancing platforms to match supply and demand for digital work, at lower costs. According to the World Bank, work on digital freelancing platforms currently accounts for 6% of the outsourcing market, but it has been growing 30% annually and is expected to reach $25 billion by 2022, employing over 30 million people[ix]. One medium-term alternative for Samasource would be to create its own freelance platform. While it could cannibalize part of its current portfolio, it could also be an opportunity to expand its services and segment them based on the type of activity, skills demanded, or level of excellence required.

Currently, Samasource outsources tasks that require low to mid skills. The Big Data movement and the development of artificial intelligence represent big market opportunities, as they demand a lot of digitalization, data entry, image tagging, transcription, and other relatively simple digital tasks. However, once both stabilize and the demand for these mid to low skill tasks decrease, what will be the future of Samasource? Can they include more high skill tasks (such as coding or software development) on their business model? If demand for work declines, can Samasource keep employing people in both emerging markets and the US? How to justify it in face of isolationist and extreme nationalist pressure?

(791 words – not including bibliography)

[i] Schwab, Klaus. “The Fourth Industrial Revolution: what it means, how to respond.”  World Economic Forum, January 2016.

https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

[ii] World Economic Forum. “Impact of the Fourth Industrial Revolution on Supply Chains”, October 2017 http://www3.weforum.org/docs/WEF_Impact_of_the_Fourth_Industrial_Revolution_on_Supply_Chains_.pdf

[iii] Gino, Francesca, and Bradley R. Staats. “Samasource: Give Work, Not Aid.” Harvard Business School Case 912-011, December 2011. (Revised June 2012.)

[iv] Walmart and Samasource Case Study, accessed on November 15th 2017

https://www.samasource.org/walmart

[v] Accenture on the Future of work, accessed on November 15th 2017

https://www.accenture.com/us-en/insight-digital-disruption-future-of-work

[vi] Samasource 2016 Impact Report, accessed on November 15th 2017

https://www.samasource.org/impact

[vii] Samaschool 2016 Annual Report, accessed on November 15th 2017   https://docs.wixstatic.com/ugd/e4cc5f_39a0d0a3b43a45668f969ef645c727e3.pdf

[viii] Samasource 2016 Annual Report, accessed on November 15th 2017

https://www.samasource.org/2016

[ix] World Bank, The Global Opportunity in Online Outsourcing, accessed on November 15th 2017  http://documents.worldbank.org/curated/en/138371468000900555/The-global-opportunity-in-online-outsourcing

 

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8 thoughts on “Samasource: Increasing productivity in the US while reducing poverty worldwide – is it possible?

  1. Great article on an interesting topic! I too was contemplating what might happen to this industry in the future, it seems like digitalization is good for impact outsourcing now, but every advance made by these workers slowly displaces the need for them. However, it seems like this will still be a booming industry in the near to mid future, and hopefully these companies can continue to grow and reach a large portion of the developing world.

    I’m more concerned about the future for Samasource as a business. You mentioned that its business model is much more fixed-cost focused and scales less to supply and demand, and in order to break even it has essentially had to help future competitors build models to succeed in the space. Is the goal of Samasource to grow the industry as a whole, or focus on their own viability as business? It seems like the right now they are doing more of the former, which is great for the overall social good but may not be the best business strategy. Do you think they should focus less on the advisory part of their business in order to continue to be the leader in the market? Or would Leila Janah be just as happy seeing this industry take off even if it leaves her own business behind? I’m curious to see where they go in the next few years!

  2. Thank you for such an interesting read! As more and more data become available and digitized, the barrier became less significant. Thus, I would imagine that this will be the future of training and impact outsourcing. To answer your questions, I think the industry will be highly competitive. I think there will be a lot of competitors come into the same market, and the future of Samasource will be highly depend on its ability to maximize its first mover’s advantage and ability to penetrate emerging market. As the development of artificial intelligence become more advanced, more and more low skill jobs will be replaced with AI, to keep up with these changes in market, I believe Samasource could include more high skill tasks on their business model to keep employing people in emerging markets. In the US, however, I do not believe Samasource would continue to grow much in the future, especially in the mid to high skill tasks market. Implementation of AI will face many hurdles given the presence of unions and government agencies. I would not expect huge decrease in worker demands, rather the biggest problem Samsource would face should be quality of their trainees. This “one to many” education/training model needs to be well balanced between quantity and quality.

  3. Thank you for this amazing overview of Samasource’s work on how digitization of supply chain management can actually be used to create jobs for displaced peoples! I would argue that your article may also address a possible effect of climate change on supply chain management as well which might be to displace more people and create even more need for workers with basic-to-mid-level training who will be able to contribute in this way. In addition, I think that this perhaps disruptive change may also increase the rate at which peoples around the world are motivated to adopt these skills. I do wonder whether as with past jobs the new skills needed in the age of information technology are as susceptible to future disruption as labor skills have now become in the face of digitization. Samasource seems to have a sound business model based on a very specific and niche need but ultimately I think their ability to scale up this core function is the key to their success.

  4. I am convinced that we are only at the onset of digitization. I believe that, even though AI capabilities are increasing, humans will still be needed to do all kinds of digital tasks over the next few years. So I am not too worried – at least not at this point – that the market for the type of service Samasource provides will shrink. However, I do think it is critical, especially in the face of recent isolationist movements, that Samasource focuses on outsourcing digital labor not only internationally but also nationally. One way to do that is to partner with other non-profits or organizations (e.g. Opportunity@work in the US) that work on training people who have lost their jobs for instance due to automation. The proportion of those people will increase over the next years, so that even within the US the need to retrain people tobe able work new kinds of jobs will likely be high. Samasource’s clients such as Walmart or Google could then make the active decision to pay a little bit more for the service in order to support people in their communities.

  5. Thank you for writing on this. I am one of the many who share a concern over the future of work given the growing trend in machine learning and AI. I personally think, as you allude to, that the biggest risk facing Samasource in the long term is whether the types of skills their employees have are going to be relevant going forward, and I think the owners should take a strategic view of how they are going to skill up their workers or respond to the opportunity presented by the rapid changes in information technology.

    In the short term I think the company has to seriously consider process and value engineering, with a focus on being lean by cutting down unnecessary costs and bringing up efficiencies. In the mid to long term the company should assess the opportunities in the broader market for skills outsourcing, to be able to provide a skilled laborforce at affordable rates to the organization’s clients.

  6. Really nice read! What I am concerned about a bit is the ease with which Samasource can reduce its asset heavy model. I believe many of these workers require physical training and that with their present skill set they will not be able to understand or implement if trained digitally hence I am concerned about converting this into a low fixed cost business model. Also if we proceed towards other tactics like outsourcing to a training company for the training part of the business, how do we ensure that these training companies do not use their strategic importance in the supply chain to exploit the workers.

    I do believe that as long as AI is in the future we should focus on driving maximum value out of this model and try to implement it as much as we possibly can. Ideally, as a society our focus should be on avoiding any future refugee epidemics so that this solution can help the present lot and we do not have treat this as a continuous process.

  7. Great read. There’s an argument to be made that companies like Samasource are allowing their U.S. clients to allocate capital more productively, while elevating the labor opportunities in emerging economies. This in turn creates:
    1) the means for U.S. companies to innovate and highlight the next frontier of jobs
    2) the fuel for workers in developing economies to fight poverty

    But you’re right, the argument doesn’t jive well given the current isolationist movement. The question I’d ask is whether this movement reflects a lasting shift in the general sentiment of the American public or just a temporary discussion associated with the current political office? The answer to this question also impacts Samasource’s long-term strategy.

    Your points around Big Data and AI are valid – there’s no question emerging technologies will eventually displace low/mid-level tasks, but the big question is how fast? And will that time be enough for Samsource to adapt to market forces?
    I believe the true adoption (at scale) of Big Data and AI across industries will greatly differ. As such, until society builds trust in these technologies, you will still need low/mid-level workers. While some companies are trying to perfect these emerging technologies, the reality is, there are still others who are trying to automate data entry. I don’t think the demand for Samasource is going anywhere anytime soon.

  8. Laura,
    This is a really awesome story. I very much hope that the program can continue its momentum and achieve profitability and sustainability.

    This is a great example of using lower-skilled workers to accomplish complex tasks in the increasingly-modern economy. As automation and the digital age make moderately-skilled labor less and less necessary, there is a growing challenge for societies to find a place to employ all of the displaced workers, and this program provides an ingenious blueprint for us to think about.

    Does the company differentiates the work that it sends abroad from the work that it sends to NY and SF? There is an assumption, which may or may not be valid, that the average worker will be somewhat more skilled in the developed economies, and I wonder if that effects a model like this that in many ways tries to overcome that very same kind of skill gap.

    Thanks again for the great read!

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