Outsourcing Strategies

Towards an SME Outsourcing Strategy in Iran:

Targeting the Highly Qualified Female Labour Force

Introduction

Outsourcing has been a part of business for centuries. It is not necessarily related to IT and is just the shipping out of some business processes to a supplier. When you think about it, very few Small and Medium sized (SME) enterprises will do their accounts, legal and marketing processes, which are cheaper for someone else to do or require special skills. So, almost all companies are already outsourcing. The difficulty lies in deciding which processes to outsource or keep inside. The obvious thing is to keep the core competencies in, as that is the competitive advantage. Theoretically all other processes could be outsourced. Therefore SMEs need to have the right information in order to make informed outsourcing choices - until that time, they will sit back and wait. When that happens, the SME outsourcing market is set to explode.

The most important asset for any enterprise, whether handling a task inside or outside, is human capital. According to the last national census, conducted in 1996 in Iran, from the total population of 60,055,488 persons, 30,515,159 (50.8 per cent) were males and 29,540,329 (49.2 per cent) were females. One of the realities of the working environment in Iran is the high rate of unemployment. The latest survey (April 2002) estimates the number of unemployed at 12.6 per cent of the total active population. Estimate for women's unemployment rate is 17.6 per cent. That of men is 11.7 per cent. While the unemployment rate among men decreased during the preceding year, the rate for women increased and proportionally speaking, most of the unemployed continued to be women. Female employment rate has not improved for the last four decades. This is partly due to the fact that the state is unable to provide job opportunities for women and partly because of certain social limitations Iranian women are facing; which will be discussed later in this article.

The other reality is that educational levels have experienced a steady rise in Iran in recent decades. Increasing number of female university students in proportion to male students is an important event. Over 60 percent of the total new university entrants are female and this trend is likely to continue. As a result, on one hand, there is a concern regarding possible future cultural mismatch between female and male population and on the other hand, because Iranian women are generally not in job positions they are interested in, the best way to fulfill their interest might be helping them to build their own businesses and become outsourcing choices for SMEs.

More than half of women who work are married which means that they have the double role of working inside and outside home. In Iran, as in many other developing countries, female workers' mothers, mother-in-laws or other female members of the family often pick up part of the female workers' responsibilities in their absence. However, as there is a negative correlation between the level of education of female workers and the prevalence of extended family structures, this support system is probably not available for professional women and many of them would rather not work and instead stay at home in order to meet their home and family needs.

The point of this article is that, with the condition of highly qualified female labor force in Iran, outsourcing is a considerable option for SMEs to get the most out of this potential (especially in the educated female population), by outsourcing their tasks to them. But as many of them would rather stay home for several social reasons, it will be discussed that "HOMESOURCING" to female labor force is a viable option for Iranian SMEs.

Economic Profile of Iran

While there have been serious problems with achieving sustainable economic growth in the past, the Iranian economy has experienced respectable expansion in the last years (Figure 1). Reportedly, real GDP growth was 5.9 percent in 2000-2001. Of course this expansion is mainly due to relatively strong oil prices, which has resulted in the enhancement of manufacturing, trade and construction activities as well.

Figure1: Sectoral Shares in the Iranian Economy

Description (At constant prices ) 1998-1999 1999-2000 2000-2001

Agriculture, hunting, forestry 15.56 13.69 12.69

Fishing 0.32 0.31 0.34

Mining 11.45 10.19 10.49

Manufacturing 16.1 17.29 16.64

Water, electricity and gas 1.65 1.59 1.29

Construction 4.02 4.6 6.21

Wholesale & retail trade 15.76 14.83 15.13

Hotel and restaurants 0.97 0.88 0.8

Transport, storage and communications 5.56 6.12 6.31

Financial intermediate 1.87 2.48 2.35

Real estate, renting and business activities 13.16 13.8 13.54

Public administration, defense and social security 5.06 5.18 5.36

Education 3.89 3.97 3.95

Health and social work 2.67 2.81 2.71

Other community, social and personal activities 0.97 1.19 1.03

Total 99.01 98.91 98.85

Net taxes on imports (Taxes minus subsidies) 0.99 1.09 1.15

Gross domestic product (at market prices ) 100 100 100

In sum, beside oil-based economy and high rate of unemployment, the other challenges of working environment in Iran are as follow.

- Mismatch between needs of business market and training system.

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