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If euphoria alone could ensure success, India could have become a global
torchbearer in telecom reforms by now. But all of us know what happened.
Euphoria, by itself, is not bad. But
euphoria leads to hype. And hype prompts people to look out for quick bucks by
manipulating the situation to their advantage. That leads to chaos. That is exactly what
has happened in the emerging call centre segment in India.
Yes, it still has the potential to become
India’s biggest export revenue earner. It still has the potential to generate
large-scale employment. But everything is not right in this nascent industry. Though the
euphoria still persists, many gaps in planning makes one doubtful about the success of the
mushrooming outsourced offshore call centres.
But why? Did not NASSCOM-McKinsey study
project it as one of the biggest growth areas for India? And did not Voice & Data
call
it "the next big thing for India" just a year back? What has changed since then?
Much. Call centres are the most
important–sometime the only–channel of direct communication of a company with
its customers. As companies realize that there is no better competitive advantage than
customer loyalty, Customer Relationship Management (CRM) has suddenly become the most
important tool for the corporations. Call centres, the most tangible component of the CRM
function, hence, are being more closely examined than ever before. But the important
question is that can you outsource the most vital function of your business to some one
else? And are these call centres ready to handle the new challenges?
What are these new challenges anyway? The
biggest of these is the new all pervasive channel of communication–the Internet. How
can one use the Internet to effectively interact with customers? How can one handle the
customer responses that emanate from the Net? Should the customer interaction be centred
round the Web? Can you completely do away with the telephonic call
centres? If not, should
you continue with both in an isolated manner or can integrate them? If you decide to
integrate for better functionality, is your outsourced call centre capable of doing that?
Does it have the requisite skills?
These are some of the questions the West is
still trying to find answers to? In India, when we started talking about call centres
about a year back, these questions were just beginning to be asked. Most of our aspiring
call centre businesses are either ignorant or have decided to ignore these questions.
Their partners–consultants, integrators, vendors, etc–have hardly warned them
either.
What most (barring a few exceptions) of the
Indian prospective call centre businesses are planning to do is what the US call centres
used to do three-four years back. That would have been okay had they been looking at the
domestic market. But they are hoping to get business from abroad, especially the US.
The underlying hope (very few will admit it
openly, though) is that one can compete on cost. This is a fallacy. It is time to put the
record straight.
One, customer interaction is the last area
that companies will look for the purpose of cutting down the cost. Just by offering
low-cost and no extra value, it is almost impossible to get customer interaction business.
Two, too much of talk on this 65
percent-of-the-call-centre-cost-is-manpower-cost has led many to believe that
companies want to outsource their call centre business to India only because of cost
consideration. The reality is that unavailability of enough people has led US companies to
look at alternatives. India seems the best suited because of so many factors like
qualified manpower, English language, comfort with technology, and yes, cost being just
one factor.
So the Indian call centre companies who
hope to get business from the US users will have to adhere to the same quality norms as US
call centres. And they have to evolve at the same speed (even faster will be better) to
cope with the new emerging challenges. These are the two fundamental rules that any
aspiring call centre businesses need to keep in mind.
The Chaos
Much of the confusion is due to the hype
created by different interest groups and fuelled by media. Growth figures have been
manipulated to create the prevailing chaos. Many aspiring call centre businesses have been
on the lookout for basic data on call centre market. The NASSCOM-McKinsey study is the
most favourite. It gives the size of global customer interaction services–call
centres are a part of it–revenue in 1998 as $6.5 billion. Most market researchers
give a figure three times higher. IDC estimates the call centre outsourcing services
revenue alone to be $17 billion in 1998. Datamonitor gives a figure of $7 billion for
European call centre outsourcing revenue in 1999. Others also give figures that are in
small variance with IDC and Datamonitor figures.
Vendors, when they quote these figures, are
suspected by the prospective call centre entrepreneurs, for inflating figures. Beginning
of the confusion.
Talk
opportunity cost of not having enough bandwidth?
Here is a simple calculation that will show you the figure.
earning per seat per hour will be $15 for Indian offshore call
centres.
l The call centres will operate only one shift (8 hours) a day.
utilization per seat in normal voice call centres is about 8 Kbps.
revenue per seat is   Â
In one year, the revenue per seat is   Â
In other words, the opportunity cost per annum
for not having 8 Kbps is  Â
The opportunity cost of not having 1 MB is   Â
Converted to Indian currency that is   Â
The export revenue loss due to unavailability
of 1 MB of bandwidth is  Â
$120 x 365 = $43,800
$43,800
$ 5,60,6400
Rs 24.1 crore
Rs 24.1 crore per year
The second question of most
entrepreneurs is the cost of setting up a call centre. Project reports available in the
market give set-up cost of a 100-seat call centre (the size that most are looking at to
start with) to be as low as Rs 6 crore. When integrators step in with prices and they are
added together, the cost is not less than Rs 10 crore by any means. And the difference is
significant. Confusion number two.
And then there are self-styled specialized
consultants and end-to-end solution providers who add to the confusion. And of course,
above all there is DoT, which as usual has decided on its own what is allowed and what is
not and has come out with a "guideline".
All these, of course, contribute to the
chaos. But the major reason is the fact that call centres are perceived to be a low-tech
business where anyone with some money can enter. That is precisely why voice call centres
(perceived to be low-tech) are hot favourites though e-mail/chat-based call centres
require less investment, give faster return on investment and are easier to manage. The
other reason is many traditional big business houses that somehow missed the IT/Internet
wave, see it as their last chance to enter into technology area. And this seems a
low-tech, high-opportunity area.
When there are too many people seeking to
clarify their doubts, and too many self-styled experts promising to clear these doubts,
what follows is chaos.
Prospering Nonetheless
This, of course, does not mean that
everything is bad with this industry. Crores of rupees have been invested and business has
started coming in. Today, there are at least five such call centres operational in the
country. And another 20-odd will be functional in the next four to six months.
The most talked about is Spectramind of
Raman Roy, who set up GE’s facility in India, which kick-started the offshore call
centre industry in India. His is the only major call centre funded by venture capitalists
and plans to have more than 1,000 seats in Gurgaon. Another company, which has announced a
1,000-seat call centre, is Air Infotech–also based in Gurgaon. It has already gone
live though partially. Gurgaon is emerging as the call centre capital of India with not
less than 10 call centres slated to be launched here in the next few months.
Ahmedabad, Chennai, and Mumbai are the other hot beds.
Flex Industries and Hero Honda are the
non-tech companies to have announced a foray into offshore call centre business. Many
others are studying the market to formulate an entry strategy.
This business is going to succeed in the
long run in India because it is a people centric business where people have to be fast
learners. All other skills do not matter in the long run. And this is something that India
can boast of. People are something that India has in plenty. And quite a few of them are
educated, smart, and can speak English.
Also, the demand will explode in near
future due to the explosion in e-commerce transactions. These will require support
centres–the opportunity which the call centre industry can tap. However, some
analysts predict (phone-based) telemarketing will give way to e-mail based marketing and
the ratio of inbound calls to voice call centres will increase significantly.
The entry of so many players who do not
understand the business will lead to difficult times. As the initial euphoria dies out,
some of the better ones will do good business while others will fail. But it will be
unlike dotcoms and other such opportunities where a major part of the money goes towards
marketing and is totally lost if the business fails. Call centre is about infrastructure
and people. From an overall industry perspective, the money that will go to the business
will not be lost. What is imminent is a shakeout, with the successful ones buying out the
physical and human resources of those who fail to deliver. This shakeout is likely to
happen after 15 to 18 months, with 6-9 months of transition time. Some companies are
already planning for such a scenario and formulating their long-term business strategies
accordingly.
It is estimated that in the first year,
most call centre companies will get about $12 to $20 per seat per hour depending on the
type of service rendered. At this rate, it is much lower compared to the US rates and will
make the proposition quite attractive for the US companies who want to try out India. The
operators who enter into a price cutting strategy to get business (rather than improving
on the quality of service) will only hurt themselves. Though the rates are lower compared
to the US, the low cost of business in India (thanks to the low manpower and overhead
costs) will make the business viable. In fact, the estimated running cost for the voice
call centres is estimated to be $7-$8 per seat per hour compared to the corresponding US
figure of about $22. The cost is likely to go up from next year onwards as more
capabilities are added and better quality standards are adhered to. The scarcity of people
will also take the salary up. Most call centre companies are hoping to earn somewhere
between Rs 5 crore to Rs 8 crore for a 100-seat call centre. This is based on the
assumption that business will come gradually–a realistic assumption.
Most of them are
planning voice call centres. A few companies like IT&T and Daksh.com are looking at
chat/e-mail-based technical help desks, primarily targeting US dotcoms to start with but
hoping to add technology companies to their client list later.
width="630" style="font-family: Arial; font-size: 9pt" bgcolor="#FEE09C" align="left">
Offshore Outsourced Call Centre Service Providers
of seats
Tech Help-desk
Tech Help-desk
Server based
Trends:
For voice call centres, business so far has largely come from Australia primarily due to
four reasons. One, Australia is already home to many outsourced global call
centres. But
Australia lacks people. So it is experimenting with India. Two, the accent acceptance in
Australia is liberal compared to the US. Three, bandwidth cost is cheaper. Last, the
regional director of Cincom–a CRM vendor having deployed its solution at the maximum
number of offshore call centres–Ashish Paul, who can be credited with encouraging
many Indian companies to actually take the first step and thus kick-start the industry in
India, is based in Sydney. He has helped some of his Indian clients to get business
through his personal contacts. He is the person who can be easily credited with the actual
taking off of the business in India, through innovative partnerships with clients.
However, in the long run, business is likely to come from the US as language is a problem
for most countries in the Europe–the other major market for call centre outsourcing.
The business so far has come from the
traditional user segments of call centre–the finance/credit and direct marketing
companies–for credit collection, catalogue marketing, marketing support and simple
technical help desk kind of applications. In case of e-mail management assignments,
dotcoms have led. Increasingly, dotcoms will give business both voice and
e-mail/chat-based call centres while dotcoms, technology companies, and direct marketing
companies are likely give business to e-mail and chat-based customer contact
centres. It
remains to be seen whether some of the outsourced call centre operators in the US will
give business to the Indian companies or try to come in directly.
As the business increasingly comes from US
and from tech-savvy companies (dotcoms, service industries), trends that are visible in
the US will impact Indian offshore call centre industry soon.
In the US, the lines between
voice/e-mail/chat have already started blurring. The well-established voice call centre
companies like Convergys, Sitel, and Precision Response, after being challenged by the new
age e-mail management/chat-based call centre companies like Digital Impact and
Harte-Hanks, had to struggle for sometime before transforming themselves successfully into
integrated customer care companies. A few others like TeleTech and TeleSpectrum are still
struggling to get there. The primary reason for the instant success of these
e-mail/chat-based interaction centres is the low cost of setting up and running the
business, which is passed on to the client to show him excellent return on investment.
However, of late, even these companies are feeling the heat of competition because some of
the traditional call centre providers have built e-mail/Web expertise. And two, their
clients also want to give their respective customers the choice of medium. Digital Impact
has been trying to build expertise in voice call centres.
Summary: In
tomorrow’s customer interaction space, expertise in one type of media does not mean
anything.
Implication: If you want to serve the US market (or for that matter,
Australian market) you have to start preparing for an integrated customer care centre
today. Most Indian call centre companies (at least on paper) have plans for integrated
centres centred round the Internet. And these are going to be the hottest ASPs of
tomorrow.
As the competition intensifies, value
addition in different forms will be key. Some call centre companies will try to add value
through vertical specialization thus understanding the business process in that vertical
better. Others will try to analyze the customer behaviour and preferences and provide that
understanding as a consultancy service to their clients. Similarly, some will add value by
offering different types of services simultaneously. What it means is that some of the
outbound functions (like telemarketing) will be performed while servicing a support query
and support will be provided while making a marketing call. There will be little
difference between support, sales, and marketing.
As Indian market shows promise, major
professional service providers like Andersen, PwC, E&Y, and CTP will be more active.
They can add a lot of value in terms of process migration, business process improvement
and planning future roadmap for the Internet centric business, to Indian companies. There
is no reason why the Indian companies cannot compete with others.
The Challenges
Contrary to popular belief, it is not
getting business or even maintaining quality standards that will be tough. In both these
cases, it is an "either-or" situation. Some companies will go for quality and
thrive by getting more and more business. Others will not. While a few might close down,
other non-performers will be eaten up by the successful ones. That happens in all
industries.
The real challenges are two-fold. One is
availability of bandwidth. Getting a 2 MB IPLC in India is a tough task for the call
centre companies. As the business will grow rapidly, it is doubtful whether
DoT/VSNL will
be able to provide the lines on demand. Then there is the inefficient utilization. The
large delay in getting the lines has prompted many companies to pre-buy more than double,
half of which is not used. If DoT allows them to take Frame Relay lines, the bandwidth
utilization will become better. But in the long run, there is no alternative to building
bandwidth.
The second major challenge—bigger than
the first—is the availability of trained manpower. Though there is huge potential
manpower in India, to convert it to professional agents will require good training. All
companies are now planning to poach. But who will create this manpower? Few good trainers
are available. Few serious training companies are there. This is everybody’s problem.
If the call centre companies agree to sponsor good training programmes jointly that can
effectively tackle the challenge, at least to a large extent. But will it happen?
Path to Success
Today, there are more questions than
answers. Some answers will be provided. New questions will emerge. That is the
characteristics of a thriving society. However, the industry has to work towards achieving
the excellence. As Bertrand Russell argued, "Despite all odds in your
favour,
progress is not assured."
Let us hope call centres become the real
"next big thing."