Outsourcing — The Inside Story

What do two different models of outsourcing in India tell us about the future of global development?

March 26, 2004

What do two different models of outsourcing in India tell us about the future of global development?

The "passage to India" of medical transcription started as a result of efforts of Indian-born physicians in the United States to provide opportunities to family left behind.

A medical transcriptionist translates and edits information that physicians record on small portable devices as they conduct their daily rounds.

Using headsets and transcribing machines to listen to recordings by physicians, the medical transcriptionist enters the dictated report into a transcript. It is then edited for grammar and clarity — and returned in either printed or electronic form to the person who dictated it for review and signature, or correction.

These reports eventually become a part of a permanent file. In 1998, there were about 70,000 medical transcriptionists in the United States.

Siva is about 36 years old, and — until the beginning of 2000 — was utterly ignorant of all aspects of computers.

At the urging of a brother-in-law who practices medicine in the United States, he signed up for a medical transcription training course, shelling out $410 for a two-month full-time course.

Armed with this training — and with assurance from a friendly network of seven U.S.-based doctors, including his relative — Siva set up a medical transcription shop.

He rented a 300 square-foot space with eight personal computers (including one server), an uninterrupted power supply (with four batteries providing backup for a three-hour period), a hub (costing about $45) — and specialized transcription equipment. In all, hardware and infrastructure costs totaled about $10,000.

Lacking all technical knowledge, Siva hired a "consultant" who, for a monthly fee of $195, said he would both mop up all technical irritants — and also help with obtaining business.

Siva now works full-time along with two young medical transcriptionists (average age 24) and one proofreader, who is 37 years old.

He pays the medical transcriptionists $115 a month, with the proofer making 20% more. Utilities come to about $30 a month.

The server is used to download the audio files containing the physician's recordings from a second server based in the United States. Often, when Siva comes to work during the day, the U.S. server may be down — and downloading becomes impossible.

Experience persuaded him to install another server at his home. He now downloads most of the time during the night, when U.S. offices are open. If he needs to communicate to people in his relative's office in the United States, all he does is email — and then wait for a response.

The occupational hazard in all this is that sometimes he has to work into wee hours of the night, to secure enough audio data for his staff to transcribe.

After four months, Siva had mastered the production system — and was able to let the consultant go. Thereafter, he began to make an operating profit.

Luckily, the seven physicians for whom he transcribes pay him an above-average rate — that is, 10 cents per line (on the typically small volumes). His proofer ensures that the quality of the work of medical transcriptionists is good.

Siva also makes a small amount of money by training about four trainees every four months, charging them $250 each. His gross income comes to about $350 a month — a comparative fortune.

He prays fervently such good times should continue.

The brain behind this venture, founded in 1999, had previously run one of the largest educational institutions in Southern India. His plan was to provide both vocational training and services to customers in a single enterprise.

The business was meticulously planned. Early on, the company signed up one of the leading local experts of IT training, as well as two expatriate U.S. instructors in medical transcription.

The business plan envisaged three revenue streams: (1) selling transcription services, (2) training people in medical transcription, and (3) consultancies targeted at other training institutions that may be established in the country.

Branding and quality assurance were key elements of all three strategies. And hiring top talent was a key part of that.

The infrastructure and premises selected by the company are top-of-the-line. A 4,100 square-foot prime location at the center of a major South Indian city has been fitted with a back-up generator imported from Germany — insuring building-wide redundancy against power outages.

The owner also purchased a battery-operated power supply made in Taiwan.

The unit has 60 desktop personal computers from Hewlett-Packard and four Compaq servers. On top of the system-wide power supply redundancy, each workstation was fitted with a smaller uninterrupted power supply that provided backup for a half-hour period — if all else should fail.

The company has matched its power backup systems with multiple sources of bandwidth, including an ISDN line, a 2 megabyte-per-second leased line from one of the Internet gateway companies — and a 64 kilobyte-per-second backup leased line from yet another company, just in case.

The manager has left nothing to chance regarding infrastructure availability. In 1999, hardware and infrastructure cost this company in the neighborhood of $1.2 million.

The unit runs 3 shifts a day, employing 60 general transcriptionists, 70 proofreaders and 13 "super-proofers."

The latter two classes of employees assure quality control on not only the in-house transcriptionists, but also on the transcription done by 137 general transcriptionists belonging to two other smaller "sub-contractors" located in the city.

In all, the ratio between proofreaders and general transcriptionists in this company is 42%, which is quite high. It suggests the same meticulous care to quality that was earlier seen in terms of infrastructure backup.

Forty percent of the company's general transcriptionists are women, as are 60% of proofers and super-proofers.

The most skilled group has between three and four years of experience. General medical transcriptionists rate about six months of full-time training and — at the time of my fieldwork — averaged about half a year's actual production experience. They averaged $128 a month in wages.

Proofers averaged two years of production/proof-reading experience and $162 in monthly wages. Super-proofers averaged 3-4 years of work experience — and $280 in pay.

In general, a medical transcriptionist has finished college. Her 12 years of classroom education is a lot for the typical developing country.

Training is a second important revenue source. In the last two years, this company has produced eight crops of a total 720 medical transcriptionists — grossing $455 in tuition fees per trainee.

The third revenue source is consultancy services in the field of setting up medical transcription training/production units elsewhere in India. This company has provided such services to about 10 smaller and more provincial units setting up medical transcription capacity in various places in South India.

Each of these consulting contracts is worth about $3,000-$5,000. The company works for U.S.-based transcription companies for a piece rate of between four and five cents per line of transcription.

When I came calling, the top managers were visiting the United States, intent in setting up marketing office there. They were using video conferencing to show off their facilities to U.S. clients.

By competing hard in the global economy, Indian entrepreneurs and professionals are realizing their dream of a better future — and are helping to lift their country out of poverty.

Unfortunately, this dimension of the outsourcing debate is often overlooked in the United States and other developed countries.

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