If
you crawl the call centre newsgroups on the Internet, you will find countless
articles for and against offshore outsourcing.
The articles in favour of offshore outsourcing are generally written by
people who have a financial interest in their success and the opposing articles
written by people who stand to gain should they fail.
So, we at Asian Call Centres decided to thoroughly examine the offshore
industry so that we could predict what would actually happen over the next 5
years and write it without the usual bias we see in other articles.
Where to and from ?
As
you would expect, The US will lead the drive for offshore call-centre
outsourcing and 2 countries namely India and The Philippines will dominate the
market. The Philippines will
actually take over India in terms of number of agents before the end of 2003
especially for more high value work into the US market.
The vast majority of offshore outsourcing will be English speaking with
Spanish, German and French falling way behind mainly due to public adversity to
outsourcing and the importance of labour groups in these countries.
The Spanish speaking market will mainly serve Spanish-speaking
communities based in the United States and will be served by Mexico and South
American countries. Almost all work
will be conducted in major commercial cities with companies unwilling to risk
ventures in provincial towns until the market has matured considerably.
Impact Back Home
The
domestic markets in The USA and UK will be affected but only minimally for the
“in-house” call centre market. We
have already seen that companies who operate predominantly in-house centres in
the UK are far less likely to outsource offshore.
However, there is and will continue to be a major shake-up for
outsourcing companies. There is
already over-capacity in the domestic outsourcing sector and the growth of
offshore call centres will continue to squeeze margins and force consolidation.
As a result, some vendors will be forced to downsize or go out of
business. The overall market is
still growing and vendors willing to transform and move up the value chain will
continue to prosper. Those
companies engaged in low-value outbound activity will be acutely affected as
offshore facilities drive down costs in this area.
Companies focusing on the “out-of-hours inbound” market will also see
their market reduce as companies adopt a “follow-the-sun-approach”.
Structure of Vendors
The
current offshore market is made up of local entities, global players and
partnerships combining both these groups. The
larger vendors will continue to develop partnerships with Asian vendors with the
Western company operating as a sales and account management function.
Unfortunately, many of these partnerships will fail as these partnerships
fail to bring the benefits originally sought.
More Western companies will look to set up their wholly owned centres in
order to gain additional control over the operations.
This will be opposed by a number of wealthy families and conglomerates in
these developing countries that will attempt to pressure their Governments to
enforce foreign ownership rules. Those
Governments who buckle under this pressure will lose out to countries offering
more liberal laws. By the end of
2006, over 80% of vendors will be 100% owned by British and American
shareholders. The local brands
already have a poor reputation in the American market, which has severely
tarnished the reputation of this entire group.
As more of these centres set up, the average quality of these vendors
will continue to fall, which will then push this group to near extinction. More and more foreign vendors will seek to bring “middle
management expertise”. There has
already been severe criticism of the quality of middle management in offshore
centres and this will become even more apparent with the rapid growth
anticipated over the next 3-4 years.
Pan-European Centres
Companies
which have previously centralized their call-centres on a pan-European basis in
countries such as The UK, Ireland and Belgium may continue with this option but
will certainly be reviewing their options particularly with the English speaking
requirement. Very few of the
countries offering low-cost, English-speaking offshore services have large
numbers of people fluent in other European languages.
Size, Scale and Growth
The
size of each operation moving to offshore locations will steadily grow. In terms
of specific industries, the growth will vary hugely from industry to industry.
Publishing will be the major mover and some utilities except when it
could pose political embarrassments. Some
utilities are still heavily unionised and this may slow the progress of offshore
outsourcing. The IT. industry will
also look to take advantage of specific technical skill-sets in India for
help-desk activity and will push lead-generation and telemarketing work to
reduce costs in a market with shrinking margins. Although travel is generally considered a low value
call-centre activity but it is unlikely to see much movement except for foreign
airlines who will seek to take advantage of low telecommunications costs to
centralize their call centre operations in their home countries. The financial services industry will be a significant player
except in sensitive areas of the industry where there will be little movement.
There will be little movement in FMCG and Government. Unfortunately growth will not meet the expectations of many
venture capitalists, which have pumped millions of dollars into the Indian call
centre market. The newer vendors
have been very careful about spending vast amounts of money on technology like
the early players and as a consequence are able to be cheaper than the early
players who are trying to pay off investors.
These “early players” may well find the conflicting demands of their
investors and clients may force them out of business.
There
are essentially 3 periods for the offshore industry.
Honeymoon Period (Until 2003)
Call
centre companies are currently experiencing a honeymoon period with their
shareholders, employees and Governments. For
the vendors in these offshore locations, finding good quality staff is easy.
Any industry seen as a growing industry encourages an abundance of
employees especially when it is seen to be part of the “developed world”.
Investors are still investing large sums of money into call-centre
ventures even though it is not clear when they will start to see a return on
their investment.
Decision Time ( 2003 -2005)
Decision
time is already starting on a small scale.
Companies are starting to ask the following questions:
An
economic recovery limiting the availability of agents in developed countries,
and continued downward pressure on costs will fuel the growth of the offshore
industry. Governments in
Asian countries will continue to develop new initiatives to encourage
call-centre investment. A number of
Indian owned companies will go bankrupt, sell their facilities or merge with
foreign partners. A number of these
will go bankrupt as a direct result of their over-investment in costly IT
infrastructures, which are too expensive to maintain with the margins, which
will be increasingly tight. The
interest in accreditation bodies such as COPC will continue to grow in
developing countries but this will be short-term as clients and vendors fail to
experience the promised benefits.
Consolidation ( 2006 - )
Growth
will slow and it will very difficult for new companies to obtain a significant
market share. Some call-centres
will start to set up in more remote areas.
Less and less centres will be set up in Manila, Delhi, Bangalore and
Mumbai as centres look to reduce costs further to maintain their competitive
advantage and compete against their rivals who are continuing to drive down
margins. The size of each vendor
will be substantially larger than now but there is likely to be less vendors.
These vendors will operate in a number of locations and possibly across
international borders.
Conclusion:
There is a very rosy
future for the offshore call centre industry but it will not grow as fast as
many have anticipated and quality will become far more of an issue than at
present. Poor quality call centre
companies at home and abroad will face extinction within the next 3 years.
The market will become more sophisticated and the level of management
will slowly improve over the medium term. My
advice to call centre companies would be to remain focused on quality and not on
over-rapid growth or expensive marketing campaigns.
Vendors with good reputations will be sought out.
Focus on what you are good at and bring in the areas where you lack.
My advice to customers and potential customers of offshore companies is
to keep your eyes open. Many of the
companies with account management teams in London and New York often do this at
the expense of quality ex-patriot management in their operations.
Use multiple vendors in multiple countries and constantly evaluate all
areas of their service. Be patient
and you will reap the rewards. To
call centre companies in The United States and United Kingdom, I would say,
“Move up the value chain. We
can’t make widgets as cheaply in the U.K. as they can in China so just give up
and do something that they can’t do as well in China.”
Finally, my advice to technology companies such as Avaya and IBM would be
“Keep to making the boxes and stop trying to over-hype the industry in order
to sell more of your equipment. The
success of offshore call centre companies will be driven by their ability to
successfully manage high quality call centre projects and not by the size of
their equipment or their debt mountain”.
About:
Asian Call Centres was formed in April 2000 to offer high quality, English-speaking
services from Manila to the United States and The United
Kingdom. The company is a joint
venture between British-owned Info Valley & Philippines based Yapster
e-Conglomerate owned by The Former Chairman of The Philippine Stock Exchange,
Felipe U Yap. Its clients include
some of the World's largest companies in the financial services, IT,
telecommunications and Utility sectors.
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