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NEW MARKETS: Untapped Almost!

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VoicenData Bureau
New Update

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.

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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.

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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.

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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).

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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.

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