NEW MARKETS: Untapped Almost!

Much has been talked about the US outsourcing industry and
how India can benefit from this burgeoning industry. The biggest European market
in this field: United Kingdom has been ignored for quite sometime. This market
forms one third of the total European BPO industry that is growing at a fast
pace moving from US $32.4 billion in 2000 to US $64.2 billion in 2005.

According
to a Gartner study, the BPO services worldwide will grow from $119 billion in
2000 to $243.5 billion in 2005 at a 14.4 percent compounded annual growth rate (CAGR).
The UK market will be $20.5 billion in the year 2005, a huge market to be
catered to by Indian companies.

The UK call center outsourcing market is the most highly
developed in Europe. Fueled by the demand for CRM services and the development
of communications technologies, the industry is enjoying growth rates in excess
of 20 percent year on year.

Recently, the HSBC chief executive Sir Keith Whitson caused a
stir by suggesting that the bank’s Asian call center agents were more
motivated and hardworking than the British, not to mention 80 percent cheaper.
This also points to the problems that mar the UK market today.

The country is facing two pressing issues: recruitment and
retention. The call center environment in the UK has saturated. Due to labor
shortage, companies have been forced to relocate from cities rich with talent to
suburban and rural areas.

Also, the cost of labor in the country is 5—6 times higher
than in India. Datamonitor research indicates that 67 percent of the costs borne
by call centers operating in the US and UK can be directly linked to labor. This
can reach as high as 72 percent when the center employs well-educated agents in
metropolitan areas. According to Ovum, a 50-person call center operation can
cost £1.5 million in salaries alone, with maintenance costs running at three
times that.

In addition, these labor costs are cyclical with the economy,
since they tend to escalate when unemployment decreases and new technologies
emerge. At present, UK has a really low unemployment rate around 3.5-4 percent.

Another issue in the industry is the demoralized staff in
these centers. While the bosses are congratulating themselves on running an open
and effective ship, downstairs a demoralized workforce is complaining of
impossible targets and is picking the moment to leave. This is not primarily a
matter of communication. It’s because of the way most of the call centers are
established which prevents them from improving. The call centers exist as
standalone units rather than being integrated into the entire system. These
centers are driven by internal metrics that have nothing to do with value to
customer and everything to do with managing costs leading to a productivity gap.

The UK call center industry is plagued by a high attrition
rate of 30-40 percent.

So to tackle the UK market, the Indian approach should be to
position itself on the two issues, which are proving disadvantageous for the
call centers functioning in UK. The foremost point to be highlighted should be
the availability of abundant highly skilled labor. Indian call centers have
access to over 200 million English-speakers and more importantly to a pool of 15
million Indian college graduates a year. The minimum qualification for most of
the call center agents’ position in India is graduation. In some industries
like insurance most of the agents are equipped with finance degrees (MBAs, etc).

The growth in the number of Indian agents engaged in the
offshore outsourcing activities is expected to be at a CAGR of 61 percent till
2005.

Indian call centers spend only 33-40 percent of their budgets
on labor. This figure includes training and other incentives. Datamonitor
estimates that savings of up to 40 percent can be obtained by outsourcing web
contact media to India rather than answering e-mails and Web chats in-house.

In terms of quality and productivity too, India has an
advantage. Taking the example of the UK-based retail bank’s call center, we
can see the advantage Indian centers have to offer to the UK companies. The
Nasscom-McKinsey report states the number of correct transactions out of total
transactions to be a measure of quality in a contact center. This figure is 98
in an India facility as compared to 92 in the UK. Also, an Indian facility can
do 120 transactions per hour as against 100 in UK.

A major problem that Indian contact centers will face while
approaching the UK market is difficulty in business development. Business
development in the UK market is different as well as difficult compared to the
US market. Indian centers will have to concentrate their efforts in this area.
The lack of Indian companies, which have an understanding of the UK BPO industry
and can be an asset in developing business in the difficult environment of UK,
increases this problem.

Anagha Dutt is with vAngelz

Technologies, a BPO firm specializing in catering to the UK market.