Thailand’s Offshore Services Landscape
David Jerome
Graduate School of Social Sciences
MSc International Development Studies
Supervisor: Dr. Bart Lambregts. 10
thMarch 2015
Acknowledgements
I would like to offer my special thanks for the valuable and constructive suggestions during the planning and development of this research to the many people without whom this thesis would have been an insurmountable obstacle.
I wish to thank Dr Bart Lambregts, who has been an invaluable guide throughout the whole thesis process. He has shown patience and understanding through all the difficulties this research has entailed, and has always been frank and constructive with his advice. Without him, this thesis would have been impossible, and I am extremely grateful for all his time and consideration.
I also wish to thank my family, for their love and support has been constant. Despite the travails involved in this research, they have always been an inspiration and source of advice for me, and their encouragement to seek new experiences and challenge myself in new surroundings have been instrumental. I will be forever indebted to them, and hope they are as proud of me as I am of them. Finally I wish to thank Elisa Wubs, who has supported my every effort from day one, and guided and supported me throughout. I will always be thankful for her companionship and support.
Abstract
This thesis looks to explore Bangkok’s offshore services landscape and its suitability as a location for offshore services in general. Globalisation has provided an opportunity for developing countries to benefit from a new international division of labour, and there is little existing research to gauge to what extent firms are choosing Thailand as a viable location for offshore services production. India and the Philippines have become regional powers in offshore services, and a cornerstone of their economic growth has been achieved by successfully harnessing their human capital to effectively engage with this new wave of service provision. Thailand has been developing rapidly over recent decades, but how much of its success is attributable to offshore services is uncertain.
Data was gathered on offshore services firms and interviews were conducted with experts in the sector, academics and government employees in Bangkok, Thailand and in Europe over a period of six weeks from January 2014.
Results suggest that Thailand’s offshore services landscape is primarily made up of less advanced Business Process Outsourcing (BPO), but with a substantial presence of more advanced Information Technology Outsourcing (ITO) and Knowledge Process Outsourcing (KPO). The suitability of Thailand to further offshore services was contested, with many participants presenting a negative prognosis. Despite this, Thailand has many qualities that suggest it is a viable location for offshore services, and it retains great potential as a location for offshore services firms to locate in the future. Active
engagement and growth of human capital, coupled with political stability would go some way to making Thailand an extremely suitable location for offshore services in the short, and long term.
Contents
Chapter 1. Introduction ... 7
1.1. Patterns of unevenness in the global offshore service delivery landscape ... 7
1.2. Relevance of this research ... 8
1.3. Thesis outline ... 9
Chapter 2. Theoretical Framework ... 10
2.1. What are Offshore Services? ... 10
2.2. Drivers and enablers of offshore outsourcing ... 11
2.3. Firms' motives to engage in services offshoring ... 12
2.4. Different modes of services outsourcing and offshoring ... 15
2.5. Factors influencing firms offshoring location decisions ... 16
Creating suitable conditions for offshore services ... 21
2.5.1. Summary ... 23 2.5.2. Chapter 3. Methodology ... 24 3.1. Research questions ... 24 3.2. Conceptual scheme ... 24 3.3. Research design ... 28 3.4. Research techniques ... 30 Quantitative ... 30 3.4.1. Qualitative ... 30 3.4.2. Secondary data ... 31 3.4.3. 3.5. Ethical considerations, challenges and constraints ... 31
Ethical Considerations ... 31
3.5.1. Epistemological and Ontological Position ... 32
3.5.2. Challenges and Constraints ... 32
3.5.3. Reliability ... 33
3.5.4. Chapter 4. Thailand’s Offshore Services Landscape ... 35
4.1. Data sources and methods ... 35
Limitations ... 36 4.1.1. Validity ... 36 4.1.2. Data appreciation ... 37 4.1.3.
Selection Criteria ... 37
4.1.4. 4.2. Bangkok’s OSS: Basic characteristics... 38
4.3. Bangkok’s OSS: Probing relations ... 40
Ownership and markets serviced... 44
4.3.1. Line of business, ownership and firm size ... 47
4.3.2. Location ... 49
4.3.3. 4.4. Concluding remarks ... 53
Chapter 5. Explanatory factors of Thailand’s Offshore services Network ... 55
5.1. Notes on data and methodology ... 55
Access Difficulty ... 55 5.1.1. Interview difficulties ... 56 5.1.2. Additional Data ... 57 5.1.3. 5.2. Explanatory factors of Bangkok’s OSS... 57
Presence of adequate IT infrastructure ... 57
5.2.1. Regulatory context ... 59
5.2.2. Institutional and policy context ... 61
5.2.3. Stability of the business environment ... 64
5.2.4. Availability of adequate Human Capital ... 65
5.2.5. 5.3. Conclusion ... 67
Chapter 6. Conclusions and recommendations ... 68
6.1. Research Motivation ... 68
6.2. Concluding Remarks ... 68
6.3. Policy recommendations ... 70
6.4. Recommendations for further research ... 71
Literature List ... 72
Data Sources ... 80
Chapter 7. Appendix ... 82
7.1. Firm List ... 82
7.2. Provisional interview guide ... 86
Basic questions to provide background information of interviewees: ... 86
7.2.1. Further information - May differ on respondent ... 86 7.2.2.
Chapter 1. Introduction
1.1. Patterns of unevenness in the global offshore service delivery
landscape
The growth of offshore services (OSS), driven by contemporary globalisation, has introduced new elements into the international division of labour. It has created the opportunity for developing countries to profit from these with Southeast Asia, as a region, one notable example. It has become increasingly prominent in service sector outsourcing although development has been only embryonic in some countries such as Thailand, Burma and Cambodia (Tholons, 2014). Furthermore, research suggests that there is a marked discrepancy between the prevalent processes occurring amongst those SE Asian states which have embraced offshore service economic models and the current state and condition of Bangkok’s OSS. This thesis examines developments and processes of change in Bangkok's OSS, and analyses the principal explanatory factors.
Despite Bangkok’s growth as one of SE Asia’s major economic drivers, fuelled substantially by manufacturing offshoring, what emerges as a surprise is that, according to several outsourcing consultancy rankings, it significantly underperforms (Bangkok is 85th in Tholon's top 100 outsourcing destinations). However, economic forecasts identify Thailand as one of the countries with the greatest potential for future growth, for example, rated 7th in OSS according to the 2011 A.T. Kearney report (A.T. Kearney, 2011). Why Bangkok's engagement with offshore services opportunities has been limited is unclear and under-researched. Is the current wave of services offshoring bypassing Bangkok? If so, then why? This thesis will attempt to address these fundamental questions.
In order to gauge Bangkok's position with regard to OSS an assessment needs to be undertaken of the broader development of Thailand's engagement with offshore services. OSS can take a wide range of forms and the factors which account for this economic development are complex and difficult to unravel. They include but are not limited to human capital and capabilities; institutions and structures; laws and public policy; and foreign investment and confidence. The growth of Thailand's economy and structures to facilitate the emergence of OSS is also an essential aspect of this enquiry. Equally important is relating the research within a more comprehensive research programme about the globalization of services production and consequent local social and economic effects.
In broad terms, since World War II the international economy has expanded, diversified and accelerated. Industrial processes have been exported from more developed to less developed nations. Global labour arbitrage has been a major consequence of the disintegration of barriers to international trade, resulting in jobs and processes moving to cheaper locations differentiated by lower labour costs, less regulated working environments and governments sympathetic to untrammelled external investment. Neo-liberal economic prescription has been a potent catalyst for relocation of substantial sectors of modern western economies in particular and especially since the 1990s. Important also has been the communications revolution resultant from the emergence of the internet which has allowed computer-based processes to operate internationally and almost instantaneously. Offshore outsourcing
has become standard practice in the IT-Industry (Pradhan 2006), and based on the successful experience and rapid growth of the IT-Industry, and the standardization of technology, businesses in various other sectors have been adopting comparable practice. Any activities that can be deconstructed and digitally transferred around the world are potential avenues for offshore outsourcing. (Allied Digital 2010) Enthusiasm for international investment in offshore outsourcing of services stems also from pivotal changes in perception and confidence amongst business sectors. Recognition of improvements in education and skills in developing countries, and a dramatic reduction in data transmission and international communication costs has presented the opportunity for individuals and businesses to contract individuals or companies from all over the world to secure the completion of projects to requisite standards and at a lower cost (Pradhan 2006). Similarly, there is an increased tendency towards outsourcing in larger corporations (Massini et al. 2010). These large corporations have the capacity to set up offshore locations, introduce local training schemes and provide employment in lower income countries. Firms based in the developed northern hemisphere increasingly outsource production and services to the developing world for the financial advantages (market access, cost saving) that are on offer (A.T. Kearney 2009).
The scale of inward investment and the opportunity to integrate their economies into global production networks (GPNs) is enabling many Southeast Asian states to diversify their economies and enter a new phase of development (Bair 2008). A fundamental element of taking any country forward, and maintaining growth, is to provide and maintain a highly skilled and competent global workforce (NASSCOM, 2006). In South-East Asia, much attention is focused on the remarkable successes achieved by cities such as Manila and Cebu City where thousands of new jobs have been created, and the metropolitan areas are developing into versatile global offshore service hubs (Allied Digital 2010). Surrounded by uncertainty, however, is how Bangkok is responding to this form of economic restructuring and investment stimulus.
While Bangkok possesses an important position in car manufacturing, electronics and computer hardware production, a clear picture of the extent to which it has engaged in offshore services production is lacking. This research project, which makes extensive use of both qualitative and quantitative data, aims to extend awareness and knowledge of the importance, functions, volume, scale, characteristics and potential of offshore services for both Thailand, and Bangkok specifically, as they aspire to develop a modern, stable and sustainable economy.
1.2. Relevance of this research
The relevance of this research to International Development is derived from concern about development processes. There are a variety of debates in existing literature on International Development and economic geography around the question, ‘what explains the variety in development trajectories that countries (or regions and cities) pass through’ (see Linder & Strulik 2014, Pomeranz 2000, Nicholson & Sahay 2001, Gereffi et al 2001). This question has traditionally attracted a significant amount of study, e.g. how did South Korea and Taiwan become such successful economies? Why did Thailand benefit from offshoring in manufacturing so much more than the Philippines (Raquiza, 2012)? The current ‘new’ wave of Globalization in services production is giving this question new relevance.
What are the factors that determine why some countries are in an advanced position, and other nations struggle to catch up? My particular interest is to explore how Thailand engages with the services offshoring wave and what are its explanatory factors.
The academic relevance of this research project will be in contributing to the pool of information on globalized service production, precisely, what is Bangkok’s position in the offshore services industry? Additionally, this project will attempt to uncover reasons ‘why’ Bangkok is used (or why not) as a destination for offshoring, if it is indeed occurring. The current lack of research of Bangkok’s position is due to the greater awareness of the Philippines, India and Singapore (amongst others) as offshore services (OSS) destinations and greater focus as a result. This research will provide an opportunity to illustrate the state of Bangkok’s contemporary OSS, and the power relations that influence them.
Furthermore, this research is valuable from a practical policy perspective as well. Identification and quality assessment of the explanatory factors behind OSS can potentially inform country policy. Identification of the stimulating factors or lack of, behind successful outsourcing can be utilised by government or private companies to create an environment conducive for greater outsourcing. This can provide opportunities to create legitimate input elsewhere for successful development policies and projects (Bloomberg 2013). If OSS proves to be beneficial to growth within countries, an increased understanding and greater clarity of the processes and phenomena of Bangkok’s positioning in globalised service provision can be used to contribute to broader debates on globalisation and development.
1.3. Thesis outline
I will first outline the theoretical framework (chapter two). This will consist of defining ‘offshore services’, what enables them, and how they relate to larger processes of globalized economic production and the formation of global production networks. Chapter three will contain an outline of the concepts included in the research. Chapter four will elaborate on the methodology used in the research. This will include operationalization of the concepts included, the study population and the data collection methods used. I will then present some of the most significant initial findings of the research, particularly quantitative results. Chapters 5 and 6 will further elaborate on the findings on both aspects of the research (research questions 1 and 2), derived from interviews, secondary data and a business table matrix which should provide information on the current nature of Bangkok’s outsourcing businesses. Chapter seven will be a discussion of the findings, and suggestion of further research areas that have arisen during the research. The final chapter (chapter 8) will be conclusion of the research, and a summary of the overall research project.
Chapter 2. Theoretical Framework
This chapter will include a brief explanation of what constitutes offshore services, the drivers and enablers of these offshore services, the different modes of services outsourcing and offshoring , the factors influencing firms offshoring location decisions and creating suitable conditions for offshore services.
2.1. What are Offshore Services?
One of the central problems of research into offshoring is the frequent interchangeable use of terms which appear to be synonyms such as offshoring, outsourcing, offshore-outsourcing and relocation. This study will use a definition of offshoring provided by the Offshoring Research Network (ORN).
Offshoring refers to ‘’The process of sourcing business functions or processes supporting home-based or global operations from a foreign country, either through wholly owned organizational units (captive offshoring/shared services) or external service providers’’ (ORN 2007). The ORN includes a wide range of business functions and processes as offshoring, such as information technology (IT), finance & accounting, contact centers, human resources, legal services (LPO), analytical and knowledge services (KPO), software development, procurement, marketing and sales, engineering and new product development (ORN 2007).
Offshoring services (OSS) are proving to be a viable option for countries who wish to diversify their economic base, and try to increase high skilled employment and knowledge diffusion. In 2008, India had revenues of over $40 billion dollars from their IT and outsourced businesses processes (Nasscom 2009). The Philippines, Eastern Europe, and to a lesser extent South Africa, all have burgeoning sectors, and have established themselves with a share of the market. Members of The Association of Southeast Asian Nations (ASEAN) are becoming increasingly significant in outsourced business processes, with a growing percentage of their GDP based upon these services. Despite starting from a limited position, there has been a high rate of growth in the sector (and in standardisation), and country policymakers are receptive to strategies which will increase this rate of growth, and assist in the movement towards a service orientated economy.
For the purposes of this research, these ‘standardised tasks’ have been split into three separate processes; business process outsourcing (BPO), information technology outsourcing (ITO) and knowledge process outsourcing (KPO). (Baldia 2007)
BPO involves outsourcing of more standard business back-office tasks ‘’generally performed by white collar and clerical employees to achieve various benefits such as cost savings, better quality and ability to focus on core competence’’ (Tas & Sunder 2004). BPO involves outsourcing processes that are not core to a company but are essential for smooth operation of the company. The customer transfers the complete responsibility of these functions to the vendor who guarantees certain service quality standards. Such processes include customer service, payroll processing, inventory management, etc. These processes require a different skill set to KPO, in which both language and culture are far more
important considerations. An illustration of the size of the BPO market is the industry in the Philippines; by 2016 the BPO market will be worth upwards of $25 billion dollars, making up roughly a tenth of the nation’s GDP (Calderon, 2013).
ITO is the outsourcing of computer and internet work, involving processes such as programming and software management. It has emerged as a result of the expenses incurred through the maintenance of a domestic information technology/software programming department, which is labour intensive. The close linkages between the US/Europe and Asian IT industries have enabled many of these labour intensive software and programming processes to be outsourced (Rohde 2004). This process was accelerated at the turn of the millennium, when the demand for large numbers of programmers really emerged. This explosion of OSS opportunities led to many menial tasks being exported all over the world, particularly to India and other Asian countries.
KPO is the means by which knowledge-intensive and core information related activities, consisting of integral parts of a company’s value chain, are outsourced. KPO could be considered a more recent, but growing phenomenon in outsourcing. This is because of the requirement for highly skilled employees, who possess advanced analytical or technical skills in addition to specialist expertise. KPO is a prized form of outsourcing as it provides access to these employees and their ability to create added value. Similar to ITO and BPO, KPO allows companies to realize substantial cost reductions by offshoring domestic business functions to lower cost foreign venues. KPO differs by helping companies gain a strategic advantage over their competitors by virtue of the type of offshored processes and functions it involves (Baldia 2007).
2.2. Drivers and enablers of offshore outsourcing
Offshore outsourcing has brought about a significant restructuring of the international economy and redefined relations between advanced and developing economies. The trend towards offshore outsourcing has been enabled by advances in ICT, digitization and unbundling of services production processes, lowering of trade barriers, and the narrowing of the education/skills gap between the global North and global South. Alternatively, the driver of this trend towards offshore outsourcing is firms’ desire to reduce production costs and benefit from the existence of cost differentials and uneven distribution of human resources and skills across the world, or more precisely: firms’ desire to reduce (labour) costs, access skills not available ‘at home’, focus on core competencies and specialize. These processes will be discussed further in chapter 2.3.
Advancements in ICT, and the commensurate ability to communicate and transmit information across the world almost instantaneously, have been a huge enabler of OSS. More conventional methods of utilizing competitive advantage have been marginalised, and the geographical relevance of ‘local’ markets has receded (Kramer & Porter 2011). This has enabled regions that had underdeveloped infrastructure or transportation to bypass these difficulties, and engage with international markets via service provision, instead of manufacturing or production. The regions are increasingly constituents of international regions in direct competition with other international regions, rather than with contiguous neighbours or others within close geographical proximity.
The digitization and unbundling of services production processes is a further enabler of OSS. There is no longer a need to commit information, software or guidance to paper, or transport it with a person, but simply sent as electronic communication. Increasingly offshore services can be provided via online communication; videos, emails or any number of additional formats, advisors and experts can be contacted wherever they are in the world (Mann 2005). While there remains an assumption in developed countries that only low level processes can be offshored in this way (Glass & Saggi 2001), the reality is that transference of increasingly complex processes is now a viable option for many businesses. The lowering of trade barriers has been a consequence of countries understanding their national laws need to conform to other global practices if they want to establish themselves in the global marketplace (Manteau 2008). To incentivise new employers to move to a developing country, and its attendant poverty and unemployment reducing benefits, there is an attempt to minimize the bureaucracy involved in establishing a company. In addition to the tax breaks and other preferential treatment that a company may receive. Several examples of countries attempts to attract investment are; China, revaluing its currency despite the short-term gain from keeping it artificially low or India has eased many of its trade barriers and agreeing to several trade agreements (Aspray et al 2006). All these developments have proved to be important enabler of offshoring, either by incentivising companies or removing restrictions to their operation.
Arguably the most substantial enabler of offshore services is the narrowing of the education/skills gap between developed and underdeveloped countries. India and china have both implemented policies for developing their offshore services, and improving their educational systems to supply the necessary number of skilled workers (Miyamoto 2003). As well as having adequate infrastructures (power, transportation systems, telecommunications) to provide good service to their IT companies. The success of India and China in retaining senior technical and business leaders is an indication of appropriate policies being in place (Aspray et al 2006). These senior personnel strengthen the investment climate for foreign investors, as well as bolstering and increasing the skills of the workforce (World Bank, 2003; UNESCO and OECD, 2003). All of which provide fertile breeding grounds for enabling offshore services. What is driving the trend towards offshore outsourcing? Basically that would be firms’ desire to reduce production costs and benefit from the existence of cost differentials and uneven distribution of human resources and skills across the world, or more precisely: firms’ desire to reduce (labour) costs, access skills not available ‘at home’, focus on core competencies and specialize
2.3. Firms' motives to engage in services offshoring
The increased accessibility of labour resources worldwide, regardless of company size, (Gartner - IT research and advisory company) has given rise to new business models that enable companies to tap into resources found abroad without losing control of the value chain and the quality of the end product. Their ability to conduct business online has ramifications for the development of the global economy, and is not restricted to larger corporations. There is a trend towards large scale outsourcing amongst larger corporations, but the ability to outsource specific, complicated tasks provides the increased capacity that smaller companies need to be competitive.
These factors may also influence the forms that OSS will take. Complex decision-making governs resolutions to offshore; firms possess various motives and conditions which are necessary to meet (Bunyaratavej et al., 2007). These new motives are determining the direction of travel of global sourcing models i.e. sourcing from the global markets the necessary goods and services. Disparities between global markets are exploited by firms seeking access to more cost efficient employees and resources and developing countries with lower tax breaks or tariffs. These motives include, but are not limited to, securing lower labour costs, gaining access to appropriately qualified personnel (for skills, and market access), augmenting company specialisation and focusing on enhancement of core competencies. Each will be explained further in the next part of the chapter. Firms may have a particular motive (e.g. skills access) to offshore services, but they are inter-related, and difficult to separate out.
Lower labour costs
The pursuit of lower labour costs is one of the most frequent concerns behind a firm’s decision to establish offshore processes. Traditionally, these processes have been industrial or manufacturing in nature, requiring large numbers of low skilled workers. However, technological developments have enabled standardization of tasks, with face to face interaction no longer required for the operation of many back office business functions. Increasingly jobs in specialized professions (architecture, application development, R & D) are subject to offshore outsourcing. In principle, all tasks that can be telemediated can be outsourced and/or offshored. Lower labour costs remain a key factor in any company’s decisions to outsource processes (Havranek & Irsova 2011). If the decision to offshore is based on a requirement for abundant cheap labour, then a firm will prioritise a destination where it will have access to this labour (if it has the requisite skills). The incentives for companies to outsource are frequently to be found in the potential savings in labour costs. India and the Philippines can offer a 32% to 38% savings for U.S. companies (Forbes 2008) that are willing to outsource their more time (and expense) incurring activities. This is a powerful enticement for companies to investigate.
It often proves cheaper for smaller companies to outsource. Theoretically, a small company in an emerging market could establish a particular business activity but at the cost of hiring dedicated staff. It is financially preferable to simply outsource these tasks rather than undertake the burden of employing full time staff and deplete the company's scarce logistical and organisational resources. This is in marked contrast to larger companies, which have dedicated teams in place to perform business administration tasks (e.g. reimbursement) (Taylor 2011).
However, companies typically do not use outsourcing to reduce managerial or high level executive costs. This would suggest that companies do not desire to reduce wage expenditure for employees at all levels, but rather employees with the requisite technical skills (software, applications management) or low skilled employees (labour intensive/manufacturing), and in so doing minimise specific types of cost. Qualified Personnel
Access to suitably qualified personnel also influences companies’ decisions to offshore. Academic focus has accentuated reduced labour costs as a primary motivator for offshoring. However, companies often
use offshoring to access talent pools, especially highly skilled and proficient workers, outside their home country (Manning et al 2008). The increased expenditure by nonwestern countries on science and engineering has paid dividends in the form of a large number of highly qualified graduates. These graduates are providing the skills and resources that are driving the growth of OSS, in addition to providing alternative suppliers, and increasing total supply capacity. The acquisition of specialized external capabilities, and scope for high level knowledge transfer, is an attractive prospect for international firms (Zanfei, 2000; Dunning, 2000) This search is driven by a scarcity of highly qualified and skilled personnel and the higher cost of specialised labour at home.
Further business justification for this search for additional qualified personnel is that by securing the services of new employees, a company is also acquiring that employee’s experience of a foreign market. This insider knowledge of a foreign market is often unavailable domestically. This reflects the shift of market penetration strategies from established to new and unknown markets (e.g., Christensen, 1997). It is cheaper to procure experience of a foreign market, rather than relying upon the expensive and time consuming process of transferring employees from a home nation.
The improvement to organizational flexibility by increasing the speed of business processes has allowed professionals located anywhere in the world to be both available and accessible. These freelancers can be hired by companies (or more often small businesses) as subcontractors and save the small business owner time due to their availability, if they have the requisite skills. This is in addition to removing the burden of paying overhead associated with payroll management, tax and other expenses.
An influential factor also is the phenomenon known as ‘brain circulation’ (Saxenian et al 2005).This is the opposite process to a ‘brain drain’. It is driven either by the difficulty of emigration to developed countries, or by growing standards of living and opportunities in home countries. The growth of intellectual capital in countries, and more importantly the decision to remain (or return home), has proved to be important for a countries development. Although debate persists whether the degrees possessed by these highly skilled workers are comparable to those of western institutions, and whether the employees are of lower quality as a result, nevertheless the move towards standardisation of higher skilled work allows for the use of less skilled personnel for lower labour costs.
The financial crisis of 2008 has accelerated the drive to offshoring as countries within Southeast Asia have offered increasingly a more secure economic environment of lower labour costs, sufficiency of suitably educated and skilled professional staff and requisite technological platforms (ORN 2008). Specialization
Specialisation refers to the increasing tendency for firms to offshore knowledge work such as software development, engineering, product design and research and development, as opposed to routine IT work (Lewin 2006). Small companies in particular outsource work to compensate for their lack of capital and capacity. The improvements to technical processes as a result of technological progress allow for software testing etc to be performed remotely. This provides opportunities for companies to compete despite their lack of domestic capacity, offsetting these shortcomings with cheaper technical support
provided internationally (Brusoni 2005). This is a trend predicted to increase, as the opportunities to offshore a wider range of services grows, and firms looking to new business models, technologies and ideas explore their options.
Focus on core Competencies
OSS also provides an opportunity for a company to focus on its ‘core competencies’. This phenomenon has become associated with smaller firms, where skill sets of personnel, time and cost are central considerations. Outsourcing of bureaucratic tasks frees key personnel from performing these tasks, and they can invest more time and energy in the firm’s key business functions. The decision-making calculation for which processes to offshore depends on the business conducted. Customer relations, product design or infrastructure development is often accorded a higher priority than payroll or human resources. Focusing on the more important business processes, and outsourcing others can help a company develop a competitive edge (Leavy 2004).
2.4. Different modes of services outsourcing and offshoring
Differing modes of outsourcing and offshoring are an important variable to consider. There are advantages and disadvantages of particular models. Companies which prefer a greater level of control over the supply chain might opt for the complete ownership model, rather than a service provider approach. Every program or project that is offshored can only be effective with the right model supporting it, a model based on a particular business need or scenario. Only by investigating several factors, such as country analysis, international business strategy and outsourcing strategy can a decision over the most appropriate OSS mode be made (Babu 2006). The three most common models are Joint venture offshoring, subsidiaries and outsourcing to a service provider.
A joint venture model is when an international organisation establishes ties with a local firm, either through investing in a firm or by forming an independent company in which each partner contributes resources. This is an attempt to create a mutually beneficial arrangement where the strengths of each partner are combined to compensate for their weaknesses; strong local knowledge can be
complemented by the resilience of a larger organisation to provide an effective business unit. A company who is looking to ‘learn’ the intricacies of a local market can derive a lot from a local partner, and a local partner is provided opportunities to move up the value chain (Kamminga 2007). This
strategic approach has been popular as it provides a gradual evolution of the firm, and paves the way for a subsidiary down the road if desired.
A subsidiary/captive offshoring model is a viable alternative to a joint venture model. A subsidiary or local office can be established if there is confidence that local market operations can be contended with. Subsidiaries operate as independent businesses, performing duties and programs for onsite teams, so their management is conducted in the same way as other firms within Global Value Chains. This model is very popular with high tech firms, if they possess the requisite qualities and can effectively harness a multicultural staff, then offshoring can be a valued part of their diversification strategies (Babu 2006). By moving some of their projects or maintenance aboard firms can have a greater global presence; it also provides an additional service to clients who may wish to offshore processes themselves.
Offshoring to service providers is the third main version of OSS. By outsourcing a project or program to a separate operator firms can avoid a deep commitment, harnessing the benefits of offshoring, while minimising the risk of doing so. Outsourcing to providers is arguably the most viable outsourcing model as it encompasses projects ranging from the very small, to multi-year contracts. Firms can put their employees at a clients disposal, giving them an increased capacity of skills required to complete a project. This model of outsourcing is typically adopted by smaller firms who benefit greatly from increased capacity, and that have a relationship with the client organisation (Farrell 2005).
It was not possible to determine accurately the types of ownership demonstrated in Figure 2.1 for the firms identified in this study, this is an issue that will require further investigation by researchers. For the feasibility of this study, the owning regions of firms have been recorded.
Overseas Country (offshore) Complete ownership Intra-firm (captive) offshore Shared ownership Joint venture offshore
Third-party ownership
Offshore outsourcing: a) To local company b) To foreign affiliate or
another TNC
Figure 2.1 – Different forms of offshore organisation (Source: Kleibert 2011)
2.5. Factors influencing firms offshoring location decisions
Multiple factors determine the suitability of a location for offshore services; one key element is the motivation and strategic perspective of the business owners or shareholders. More significant are country specific factors. To meet the specific requirements or preferences of a company a number of potential locations must be investigated and assessed for their suitability. In essence, businesses' decision-making is conditional upon whether the firm is looking to offshore a business process, and is correspondingly seeking a suitable location (captive or outsourcing model) or, alternatively, it produces services outsourced by others and sets out parameters for a suitable business environment (Bunyaratavej et al 2008).
Availability of Adequate human capital
Firms looking to offshore activities will give preference to a location for the cost and skill levels of the local labour force, with the skills being sought dependent on the type of activity being offshored. Offshored service tasks usually require a certain amount of technological knowledge and the availability of efficient and competent IT workers for businesses to operate effectively (Markusen 2005). The success of offshore services countries often derives from the skills of its graduates and the more innovative and computer literate they are the better.
BPO processes require different skills to ITO and KPO, although they are generally sequential in nature, with more complex tasks requiring pre-requisite basic skills to perform more complex ones. Language skills are considered the most important pre-requisite for all processes. Research suggest that despite the growth of OSS, and the parallel demand for English language communicators able to deal with native speaking customers, it is not guaranteed that these skills are available with requisite quality. It is reported that the lack of English language skills is the main reason that applicants are rejected from outsourced service jobs (Lockwood 2012). Therefore a location that possesses the necessary language skills will be given greater consideration.
Second only to language skills, in desirability for offshore services, is IT skills. With the development of greater skills, more complex processes can be outsourced. With the growing trend towards outsourcing services there is a parallel pressure on finding employees, and firms will go wherever the labour pool with requisite skills is available. There are over 1.2 million workers in the offshore sector within India, and millions of graduates produced annually, but those who plan to work in the IT sector are ’diamonds in the rough’, and unsuited to working in offshore services which require the finished product (Agarwal 2009). This is a problem throughout offshore locations, and requires careful planning and opportunities by the state or private enterprise, providing post-graduate, job specific training is cheaper in the long term for international businesses (Miyamoto & Todo 2003).
More recent trends in offshoring have reflected alternative business objectives. Higher skilled process offshoring necessitates a higher demand for skilled workers. Firms that are looking for skilled workers will prioritise a nation or city with an abundance of suitable human capital. A high level of human capital is no doubt one of the key ingredients for attracting FDI, as well as for host countries to gain maximum benefits from their activities (Miyamoto 2003).
Presence of adequate IT infrastructure
There must be an appropriate, and resilient, IT infrastructure in place to sustain offshore services. This involves the construction of a power grid which can provide a reliable power supply for offshore services, as well as ensuring high speed internet. The negative stereotyping of developing countries possessing unreliable infrastructure persists (Williams 2006), but great strides have been made, especially in high tech services, to ensure this is not the case. In the Philippines, public power and communications are not uniformly excellent, but the dedicated offshore services business parks receive priority in internet, and power, to guarantee their effectiveness (Williams 2006).
The saturation of certain Asian markets, particularly in the largest cities, has provided an incentive for companies to look to new frontiers, and an opportunity for non (or limited) offshoring countries to attract foreign investment. The success of India and the Philippines has provided a viable economic model for others to emulate, and there is an opportunity to develop their economies by servicing non domestic clients and drawing foreign investment into their embryonic service sectors. This has to go hand in hand with the necessary infrastructural improvements, and when attempting to access new markets these considerations should be borne in mind.
Political stability
The political climate of a country is one of the principal factors influencing offshoring decisions (Davies et al 2006). A working paper from the IMF (Aisen & Veiga 2013) found that political instability significantly reduces economic growth, both statistically and economically by reducing productivity, and preventing or reversing physical and human capital accumulation. Governments in politically fragile countries need to address the root causes of political stability in order to mitigate its effects on economic development, and ensure robust economic policies which may engender growth can be enacted.
Thailand’s previous experience with political instability provides an illustration of the economic impact of instability on economic affairs. Economic growth slows, on average, by 2.1 percentage points in the year of a coup, 1.3 points in the year after and 0.2 points in the year after that (Flowers 2014). The 2006 coup was anticipated by some analysts as a stabilising force for Thailand, providing some measure of control over an escalating situation: "The best case is that the army succeeds in its goal to stabilize politics, we get a reasonable and responsible interim government, elections that finally end this crazy political impasse we've had through 2006, and investors can enjoy predictable and rational policy making," (Green 2006). However, resumption of political unrest may serve to increase scepticism amongst possible investors.
Regulatory Context
When utilizing OSS, a company is transferring their liability for members of staff to an outsourcer. The staff is no longer directly employed by an organization and this creates legal and security issues that need to be addressed through the contract between the client and suppliers. This remains one of the most complex issues in outsourcing. As foreign clients Expenditure of millions of dollar in a foreign country on sensitive IT projects carries a high element of risk and investors need reassurance that confidential material will be secure (Waguespack et al 2004). At stake is the protection of intellectual property (IP). As more sophisticated and technologically advanced processes can be exported, it is vital for companies to ensure that they hold onto their product knowledge and that the value chain functions as efficiently and securely as possible. If there are expensive monitoring costs associated with operating within a country, then it will decrease the likelihood of outsourcing being located there (Asprey et al 2006).
Institutional and Policy context
The institutional and policy context of a country involves the monetary incentives (tax breaks, reduced import duties etc.), institutions (laws) governing labour and the environment and the presence of industry supporting business organisations.
The presence of monetary incentives for OSS is a consequence of government’s realising the immense potential that offshore outsourcing has in attracting overseas investment, foreign businesses and increasing domestic employment, in addition to its role in boosting the economy, and the knock on impacts of knowledge diffusion. Governments have supported fledgling (or burgeoning) industries in the
financial policies they have implemented. An illustration of this in India would be the removal of taxes on certain imported computer parts, hardware and other related goods, all aimed at making it as cheap and easy as possible for firms to operate (Kuruvilla & Ranganathan 2008). This is in addition to the construction of superior infrastructure, roads, power systems and dedicated technology parks or IT campuses for business to locate.
Institutional adjustments have proved to be a central strategy of many developing countries that are interested in OSS. The improvements in political, social and legal environments have given greater control to businesses, and this autonomy has opened up various sectors of the economy to the worldwide market. These reforms have been initiated in emerging countries including China, India and the Philippines (Luo & Tung, 2007). These nations are showcased to the rest of the world as good for investment, boosting trade and incoming FDI and encouraging the internationalisation of services (Lahira 2011). Many businesses have found it easier than before to enter into business arrangements with foreign clients, particularly in the realm of offshore outsourcing. Mimetic pressure from other firms currently operating in OSS will allow additional numbers of firms to follow suit (Javalgi et al 2009). Industry supporting business organisations (such as Nasscom in India and IBPAP in the Philippines) further contribute to the success of OSS. This is done in several ways, one of which is through the organisation of workshops/seminars which endeavour to improve information dissemination, awareness generation and brand building. A second method is through the creation and maintenance of databases which register and organise software related activities as well as campaigning against software piracy and other online crime. A third methods is by establishing and maintaining relationships with the government and trying to lobby for the sector as a whole and by establishing industry standard (Kshetri & Dholakia 2009). These methods are all intended to improve the competitiveness of the offshore services industry, and encourage more firms to engage with OSS.
Additional Factors
Cultural structures are also an important component in successful OSS. It is crucial that the prevailing cultural norms, practices and customs are not inimical to the business objectives of a company based in another country or can significantly impact on cost/ price calculations.
An important example which can impact on any decision about offshore services is the potential for corruption. Corruption is defined here as involving ‘’breaking the rules by public officials for private gain’’ (Banerjee et al 2012). Firms or individuals may be expected to bribe officials in order to reduce obstacles in the market. Businesses may determine to avoid endogenous systems involving corruption or red tape which limit the productivity of capital (Lambsdorff 2003), reduce investment (Knack and Keefer 1995) and lower FDI (Wei 2000).
Potential investors in Southeast Asia have to acknowledge that although corruption is endemic it is not significantly better or worse in any country in the region. The lack of a transparent business environment would appear to be a negative factor when trying to encourage offshoring, with the
potential for under the table fines or fees proving prohibitive. Corruption can add up to 10% to the cost of doing business (Schoeberlein 2013). Thailand’s positioning in the Corruption Perceptions Index has
been falling over the past several years reaching a nadir of 102 in 2013 (80 in 2011, 88 in 2012). For many potential investors in offshoring businesses this is undoubtedly a major consideration and an unacceptable hurdle.
An alternative perspective perceives 'corruption' to be a positive factor within a business environment, with its potential to open up access to otherwise inaccessible markets, or to encourage preferential legislation or business practices. The short term gains of corruption can be substantial with business representatives keen to secure contracts or tenders utilising bribery to secure the business. Refusal to
comply with prevailing corrupt practices will not only be detrimental in the short term but also in the long term (Wei 2000). There is certainly a balance of advantage to be weighed trading access and operational equilibrium against the introduction of ethically questionable strategies into the business which may be difficult to control.
Creating suitable conditions for offshore services 2.5.1.
Since the 1990s, the complex relationship between globalisation and regional development has been the focus of extensive analysis (Hess and Young 2006). To be both valid and effective, a rigorous multi-scalar approach is required to adequately assess and interpret the complexity of global, regional, national and local development and the networks between them. The development of the Global Production Network approach (GPN) reflects this new methodology and encouraged the literature debate to progress beyond the idea of regions as ‘closed’, inaccessible, stand-alone entities (Lagendijk 2007).
This fresh perception of regions as entities where relations stretch transnationally, with porous linkages and relationships, is a key feature of GPN. This transference of analytical focus to understanding the complex relationships between actors on a global scale is widely recognised as a significant development (Yeung 2005). With this paradigm shift, the concept of ‘Strategic coupling’ has been advanced to provide a model for multi-scalar interactions in the construction of Global Production Networks. 'Strategic coupling' is currently understood to be the process by which local actors (economic and policy) influence and interact with global firms value chains and production networks to benefit local economic development. It is strategic because it is a rational and calculated process undertaken by the local actors and subject to alteration if circumstances change.
There are three processes which enable strategic coupling: The emergence of transnational communities, changes in industrial organisation and the initiatives by states and organisations (Yeung 2006). Large international firms can direct their regional offices in a production network on a global basis deploying technological changes which imbue firms with mobility and power in their interactions with other parts of the value chain (Taylor and Ashiem 2001). There is a need to investigate how strategic coupling is manifesting itself in the South East Asian context and a comprehensive approach to comprehension of the power relations between international firms and local actors.
States and local actors have traditionally endeavoured to attract as much FDI as possible, and ensure that it is retained in their locality. However, this process is complicated by the emergence of Global Production Networks with flexible territories and relationships replacing fixed geographic areas. The bargaining power of local regions has decreased with the mobility of firms, and therefore they have become increasingly dependent upon the unique business advantages and attributes of their zone
(Mackinnon 2012). Firms can take advantage of the distinctiveness of regions as an intrinsic part of their strategy.
In response to this, countries and regions try and create favourable conditions (Availability of Adequate human capital, Presence of adequate IT infrastructure, Political stability, Regulatory Context and Institutional and Policy context). The economic imperative for this strategy is shaped by the advantages it secures including creating employment, assisting local suppliers (of goods and other services), boosting growth of commercial businesses, allowing the workforce to compete internationally (Weisz 2011) (improving their skills and competitiveness), improving the quality of citizens' lives, and enhancing global perceptions and reputation of the country.
Fostering the growth of human capital is one of the most important pre-requisites for developing countries to start benefitting from FDI but human capital investment is not sufficient by itself to ensure developing countries will remain attractive to FDI. There must be a strong infrastructure within a country to make it attractive to outsourcers with flexible provision of labour, information and services. The socio-political infrastructure has to be conducive to OSS, protective of intellectual property rights, able to secure any material property of a company, and capable of guaranteeing amenable legislative and bureaucratic conditions.
Market friendly policy environment
The growth in volume of trade and capital moving internationally is both a consequence, and a driver, of globalization. The relaxation of trade barriers, can, when combined with market friendly policies and human capital investment, create favourable conditions for investment. Governments wish to maximize the benefits of globalization, and one way in which they can do so is through creating a flexible labour market. Liberal economic theory suggests that costs would be reduced if workers can move freely and flexibly from one employer to another (Regine 2013). Sectors that foster higher level, transferable skills are more competitive (by remaining flexible) and responsive to outsourcing demands and in consequence are the sectors that will remain economically viable.
The identification of ‘preferred’ multinational enterprises, by governments, which would actively participate with and benefit host countries, is an important step. If there is a mutually beneficial arrangement with the operating firm that ensures in exchange for human capital development and technology transfer, a supportive and nurturing environment for businesses, then this would be the preferred route.
Providing attractive tax exemption packages and preferential status for international companies will increase the amount of FDI in the short term. However, there are financial constraints to this policy, and it will not on its own attract the highest value MNEs (who possess the desired skills and technology) as tax breaks are not their sole concern (Khan et al 2011). Attracting the ‘desired’ type of company will benefit the country through skills diffusion, and enable a virtuous FDI and knowledge diffusion cycle. Policy reforms to attract the right kind of company are essential to prevent non-recurrent benefits of outsourcing and to promote long term employment and growth.
Co-ordination between formal education and market demands
To maximise inward investment and to attract the most prestigious offshoring companies targeted and responsive human resource development is key. This involves a co-ordinated and cohesive effort by the government, multinational enterprises and educational institutions to ensure there is growth in the right knowledge and skill areas, and that graduates are emerging from educational institutions ready to contribute and with minimal supplementary training needs.
There is evidence that, in the Southeast Asian manufacturing sector, there was little in the way of institutions with the capacity to deliver upgraded technical skills before the influx of FDI (Deyo 1989, Ritchie 2002). There is a parallel here with the experiences of many African countries with FDI where the growth potential was in the exploitation of natural resources and companies looking for market access. However, there was stagnant development of human capital, which can be attributed to the absence of preferred MNEs and a failure to embed appropriate and beneficial relations with educational institutions.
In marked contrast, Singapore has created a successful educational system, which produces a reliable supply of IT graduates with English language abilities. It has also engendered a supportive market environment, offering tax incentives and a modern infrastructure which has encouraged many large corporations to base their regional headquarters there. The Singaporean investment promotion agency has been active in redefinition of the educational system to make it more flexible and responsive to industry demands (Yew 2011)
Ensure positive public perceptions
Because of negative perceptions of the deleterious impact on domestic employment of OSS, countries can try and counter these damaging views by highlighting the positive impacts of efficient outsourcing. Offshoring can result in significant job increases, for example, and increasing offshoring success can lead to increased investment and the expansion of employment prospects. There is limited evidence that offshoring leads to lower employment, although there is a risk of lower skilled workers having reduced employment, but increased opportunities for higher skilled workers (Görg 2011).
Summary 2.5.2.
This chapter included an outline of what constitutes Offshore Services, what enables and drives the Offshoring sector, and firm’s motivations to get involved in offshoring services. It then went on to include the different modes of services outsourcing and offshoring, the factors influencing firms offshoring location decisions and how to create suitable conditions for offshore services.
Chapter 3. Methodology
3.1. Research questions
Differing and contrasting consultancy ratings (World Bank 2010) have prompted interest in the
question: what is Bangkok's position and prospects as a destination for outsourcing services?
Bangkok is perceived as either a richly promising undeveloped outsourcing market, or one in
which institutional restrictions and instability are proving to be sizeable obstacles to
outsourcing. Bangkok currently holds the position of 83 in Tholon’s 2013 top 100 Outsourcing
destinations. This position is anomalous within Southeast Asia’s current strong ‘outsourcing
brand’, growing domestic market and progressive macro-economic environment. The
Philippines (Manila - 3, Cebu city - 8), Vietnam (Ho Chi Minh - 16, Hanoi 23), Malaysia (Kuala
Lumpur - 19) and Singapore (Singapore - 31) are all strong contenders in the SE Asian
outsourcing market. This research aims to clarify Bangkok’s position and offer some resolution
of the lack of consensus about its outsourcing potential (Zhang 2007).
To that end the following research question has been designed:
What is the nature of Bangkok's offshore services industry, and what are its explanatory factors?
In order to answer my main research question, two sub questions have been formulated:
1. What does Bangkok’s offshore services industry look like in terms of types of services produced, ownership structure, main markets served, firm size and locational patterns? 2. How conducive is Bangkok’s commerce environment to offshore services delivery?
The first sub question is necessary to identify a number of the characteristics of firms in Bangkok’s offshore services (BKK OSS). These variables are: types of services, ownership structure, size of firms, markets served and the location of firms. The second sub question is assessing the quality of factors affecting FDI/offshoring decisions. These factors are: the availability of adequate human capital resources, the presence of adequate IT structure, the regulatory context, the institutional and policy context and the stability of the business environment
3.2. Conceptual scheme
The purpose of the conceptual scheme is to identify the contributing variables, and to present them in a way which highlights the perceived relationships between them. The variables have been drawn from the academic literature used in the theoretical framework. Figure 3.1 is an illustration of the relationships between the concepts and variables used in this research.
Within the International/national context, the researcher has included the five explanatory dimensions that combine to provide the factors determining the attractiveness of a location for offshoring. These five bubbles all have arrows that lead towards a central circle. These arrows indicate the direction which these explanatory factors flow. These factors have all been kept separate as they all require individual analysis due to the differing nature of the target respondents. There may be relationships between them, but due to the lack of prior research on the nature of OSS in Bangkok, the researcher was reluctant to presume connections that could be generalized.
Figure 3.1 – Conceptual scheme
The central circle contains the differing physical and organizational characteristics of Bangkok's offshore services industry. These characteristics are types of services performed, size of company, ownership, market served and location in Thailand. They have been presented in a list as each factor will have to be considered to present a satisfactory explanation of ‘what’ is present in Bangkok’s OSS. The arc (on top) represents local governance actors’ interference with the five factors affecting the nature of BKK-OSS. The researcher will attempt to identify these differing processes and factors (as well as any other dimensions that are unlisted), and then explore what were the contributing factors to choosing Thailand as the preferred location for offshoring.
Operationalization
Nature of
BKK-OSS
Types of services Ownership Markets services Size of firms Location Human capital Presence of adequate IT infrastructure Regulatory context Institutional and policy context Political Stability Additional FactorsThe Operationalisation tables are based on the differing factors highlighted in the literature in the theoretical framework. The two fundamental concepts of the research; the nature of BKK-OSS and the explanatory factors behind BKK-OSS are broken down into their various dimensions and explained in greater detail below.
Concept Dimensions Variables Indicators
The nature of Bangkok’s offshore services Types of services BPO ERM HRM CRM ITO Software Infrastructure IT consulting Software R & D KPO Business Consulting/ Business Analytics Legal Services Ownership Thailand Asian exl. Japan Japanese Europe
North American Other
Market served
Domestic Asia exl. Japan Japan
Europe North America Other
Size of firms No of employees
0-20 21-100 101-500 500> Unknown Location Postcode
The first concept (the nature of BKK OSS) is broken down into five dimensions, each dimension is necessary to attempt to answer sub-research question one. The types of services, ownership, market serviced, number of employees and postcode are necessary to provide. These are broke down in turn, the types of service in operation by firms are numerous, and to improve the feasibility of the research these variables had to be broken down into three categories. These are BPO, ITO and KPO, and then the various dimensions. These dimensions will be broken down into their individual processes in throughout the document as necessary and a complete breakdown in the annex. Ownership and market served
have been broken down into their various regions. These two dimensions differ in that Thailand has been included in the ownership; this was to provide additional data on the current state of Thailand’s role in particular. The size of firms was divided into five categories, to provide data on how large the number of employees involved from certain regions, and in particular processes are. Firm location will provide information on the concentration of services, whether they are concentrated in certain regions within Thailand and in Bangkok in particular.
Concept Dimensions Variables Indicators
Bangkok’s commerce environment for OSS
Presence of adequate IT infrastructure
Cost
Reliability
Regulatory Context
Ease of opening and maintaining a business Labour laws (OSI values flexible labour
regulations)
Red Tape Beneficial to OSS
Extractive
Institutional and Policy Context
Presence and quality of supporting
organisations (public and private sectors) Availability and quality of incentives (e.g. Tax breaks)
Stability of the business
environment Political Stability
Availability of adequate human capital Quantity Cost of Labour Quality Reliability
The second concept, (the explanatory factors behind BKK OSS), is divided into five distinctive dimensions. Each of these five dimensions is a consideration when dealing with OSS. The first dimension, availability of adequate human capital resources is divided into three variables. These variables encompass the necessary human-based factors to enable outsourcing, due to the varied nature of respondents; it was again difficult to satisfactorily identify accurate indicators when each firm has a
differing incentive for outsourcing. Encapsulating the specifics of each within the table was prohibitively complicated.
The regulatory context, institutional and policy context and stability of the business environment all necessitated indicators to sufficiently identify the considerations; this was enabled by the limitations of possible responses. When considering the two concepts together, they should combine to provide samples of what is occurring in Bangkok’s OSS scene, in addition to assessing the quality of the OSS promoting factors.
3.3.
Research designThis research will follow the pattern of an explanatory study. Explanatory research is required in this case as the public data on the nature of Bangkok’s offshore services is limited and requires further investigation (Bryman 2008). More detailed knowledge of the number, and type, of companies operating will provide a more secure basis for informed analytical comment to be made on the policy environment and suitability of Thailand for OSS. This primary stage is essential also to provide an evidence base for the second sub-research question and a more authoritative assessment of the quality of the factors influencing offshoring. The results may be difficult to generalize without indicating certain qualifications and caveats (not all companies publically listed) which will be acknowledged later in the thesis.
Research Location and reflection
The research location was in Bangkok, Thailand. Bangkok is the capital city of Thailand, and the largest and most populous city (metropolitan population is 14,000,000). Its rapid economic growth in the 1980s and 1990s stemmed from its success as a regional manufacturing hub, with large multinationals establishing a commercial presence there. As a direct consequence, Bangkok has been transformed into a large, expansive city. Bangkok was chosen as a research location because of the opportunity it provided to address the lack of data on its service offshoring landscape. Initial research into Thailand’s offshore services network had suggested it was concentrated in Bangkok, which made it the most suitable location to be based for the duration of the research.
