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Publisher's Outlook
August 2001


Nadji Tehrani

Go Inbound Young ManWith Teleservices Outsourcing And Keep An Eye On India


[ Go Right To: The India Call Center Advantage: Competitive Options In A Tough Economy ]

Encouraged by the supportive letters and e-mail you have so kindly sent me concerning some of the recent editorials I have written, I have decided to think out of the box once again and hopefully take you along with me because what I am about to say really comes from the heart.

While analyzing the results and statistics from the performance of Top 50 teleservices companies, which this publication has ranked since 1985 (see the March and April 2001 issues for the complete listing), one notices that the aggregate growth of total billable minutes for inbound and outbound combined indicates 14.5 percent growth. When you dissect the numbers, you will find that everything is not that rosy. (The Top 50 rankings are determined by ranking the total long-distance transport minutes [separate totals for outbound, inbound and interactive minutes for each company] for a one-year period for each company, verified by the companies' long-distance carriers.)

Don't get me wrong! I am not saying that 14.5 percent growth is something to sneeze at, because most of corporate America is anywhere between 20 to 80 percent below prior years, and few, if any, of the rest (with the possible exception of General Electric) show a comparable growth. Taken at face value, we should celebrate and be happy that our call center/customer interaction industry is doing exceptionally well. However, upon dissecting and separating inbound from outbound results, one notices a completely different story. While inbound continues to grow at a phenomenal rate, i.e., 27.7 percent per year, outbound is currently stagnant, as it was last year, growing at 0.28 percent and -1.02 percent, respectively. If you look at Charts A, B and C, you will notice that prior to the year 2000, outbound, as well as inbound, enjoyed a very healthy growth pattern. Historically, the base number, or volume, of outbound was substantially higher than the base for inbound. Actually, the outbound total billable minutes were more than twice the inbound volume. However, over the years, particularly in recent years, the tide has changed for the following reasons:

  1. Customer relationship management (CRM) growth has significantly contributed to the advance and overall growth of the inbound.
  2. E-commerce, B-to-B and B-to-C have also contributed significantly.
  3. All Web-related activities, including e-mail, Web chat and others have also impacted the growth significantly, not to mention help desk and tech support contributions.
Chart A (click to enlarge) Chart B (click to enlarge) Chart C (click to enlarge)

Click on charts to enlarge.

I believe these factors will multiply and therefore the growth of inbound will continue aggressively at about 28 to 32 percent, if not faster, for the foreseeable future. Granted, these numbers are the result of the performance of teleservices companies, but I believe they are a direct and clear indication of the growth of customer interaction/call center usage simply because virtually all Top 50 inbound and outbound teleservices companies work for corporate America. Consequently, their statistics are relevant for the rest of the industry. We realize that other organizations throw around a lot of different numbers regarding the growth of this sector. What makes our numbers different from others is:

  1. To the best of our knowledge, our statistics are the only industry statistics that are based on verifiable figures obtained from the carriers and that no postulating, hypothesizing, theorizing or manipulation has been applied to them.
  2. As my July 2001 editorial indicated, this publication, which laid the foundation for the industry back in 1982, has 20+ years of experience in this field.

To the extent that no other organization can make any of the above claims, other numbers must be taken with a grain of salt!

The Inbound Gold Rush
The inbound gold rush, which encompasses not only Internet activities, but also CRM/customer retention, customer care, customer loyalty, sales support, e-mail management, etc., in my humble opinion will continue to grow aggressively because each and every business globally could not exist without them. It follows, therefore, that as businesses grow worldwide, so does the need for such services. As a matter of fact, I personally feel we have not even begun to scratch the surface. What's more intriguing is that as we continue as a nation to transition from a manufacturing-driven society to a service-driven society, services that take place in the customer interaction centers around the globe will continue to flourish as our imagination and innovation teaches us to find more and more new applications for the wonderful teleservices business. I also continue to believe that up to 70 to 80 percent of the above-mentioned services, estimated to be about 20 billion dollars, will be outsourced to teleservices companies in the next 3 to 5 years.

A few years back, the title of one of my editorials was "Every Company Is A Call Center." I now would like to update that statement by saying that "every company is a customer interaction company," for without following this model, no business can survive. In fact, great customer service can be the only sustainable competitive advantage for every business. The bottom line, if you are at career crossroads or about to start a business, my best advice is go inbound young man (or woman) because that is where the goldmines are located.

Keep An Eye On India
By now, perhaps you think I am really going crazy, because when one thinks of India, you think of the Taj Mahal, the great culture, the magnificent Indian elephants and last but not least, the great Indian tigers, which I enjoy watching immensely. However, if you have kept up with what is going on in modern India, you know full well that India has its own Silicon Valley, which is the home for offices of America's most elite corporations in the high-tech area. When you look into the matter further, you will find compelling reasons for companies to outsource their service needs and conduct their software, other high-tech product development and R&D in India.

The number one reason for doing business in India is its abundance of highly educated college graduates with degrees in science technology, engineering, as well as related advanced degrees in similar fields. Of course, India is blessed with also having educated people with complete knowledge of the English language and just as important, they have a great work ethic and are eager to work in the information technology area, which encompasses customer interaction activities. Such a vast, competent and highly educated workforce is available at less than 10 percent of the salaries people of similar qualifications would receive anywhere else in the developed countries, i.e., Japan, the United States. When you combine all of the above, you will see that it will be extremely difficult for any other country to compete with such a powerful labor force at such a low cost. As simple as this may seem, in reality it will not be easy for businesses to consider India for a contact center application, for among other things, the cultural differences and people sophistication, as well as the understanding of the mindset of Western countries would be extremely difficult for any Indian worker. What I am trying to say is that just as you need a completely different technique and presentation methodology to present your ideas to a French person, an Italian person, a Spanish person or an American person, such diversity of the customer base may, no doubt, create tremendous difficulty for Indian projects to get off the ground until these matters are addressed. I remember in the early days of Telemarketing magazine in 1982 (which this publication was then called) we discovered that the people in the southern United States would not consider a phone call from someone without a Southern accent. In other words, it used to take a Southerner to sell to another Southerner. In addition, since the Northerners, i.e., people from New York and Boston, speak extremely fast, that was another cause for rejection by Southerners, because in the South they speak at a more leisurely pace. It took us a long time to learn how to cope with these problems. I think, therefore, that even though India has the manpower second to none, a low cost second to none and may have the potential for service quality second to none, because of these regional idiosyncrasies that every different country has, I believe that for the foreseeable future, India will encounter great difficulty until these problems are addressed.

In order to provide you with greater information on the current status of India and information technology in India, I have included an article as a sidebar by Keith Fiveson, CEO and Founder of ITESA, which is entitled, "The India Call Center Advantage: Competitive Options In A Tough Economy."

As always, I welcome your comments.


Nadji Tehrani
Executive Group Publisher


[ Return To August 2001 Table Of Contents ]

The India Call Center Advantage: Competitive Options In A Tough Economy


The economic challenges of the last year are making some businesses evaluate their outsourcing options.

Consider the headlines of U.S.A. Today, May 9, 2001, which read, "Worker output plunges -- productivity falls; labor costs soar."

These headlines highlight the continued slump and economic issues facing U.S. business and underscore why India is gaining ground with its call center proposition. Economic indicators continue to forecast profit and service cuts for U.S. business across the board. So, is it any wonder that businesses looking for profits are evaluating India as an option?

Nowadays, U.S. businesses are weighed down with debt and are just looking to "keep up." Per hour American worker output plummeted for the first three months of 2001. With the growth rate shrinking to 0.1 percent annually, labor costs continue to soar. Wage pressures left over from last year's tight labor markets escalate employee compensation cost and, as a result, many companies are forced to produce more with less.

In the CRM area, U.S. businesses are faced with increasing cost and declining revenues. Labor cost and the skills required to use CRM software, computers and other converged technologies have escalated. Quality of service and proactive upsell, cross-sell and market development cost, for customer service, sales and technical support programs continue to suffer. The software and technology advances of the 1990s have created knowledge worker demands in the 2000s. Usually, large productivity increases help keep inflation at bay, because companies can pay workers more without raising prices, thus generating rapid increases in the standard of living. When productivity drops because demand drops, the economy weakens and business costs increase. As a result, proactive CRM programs, telemarketing, upselling, cross-selling or database development programs are curtailed. CIOs and managing directors of large companies are looking for options and India or other offshore destinations are on the radar screen.

India is getting a lot of attention because of the increasing technological complexity of contact centers and the attractive labor economics of the country. Overall, workers are required to have broader skill sets. This requirement will continue to challenge U.S. business cost and profit. Several factors noted in Datamonitor's 2000 survey on the emerging contact technology point to the following:

  • An increase in the proportion of workers who handle both inbound and outbound calls (which, on average, will increase from 55 percent in 1999 to 65 percent in 2003),
  • An increase in the number of agents using e-mail, as blended agents who will handle e-mail and telephone increase,
  • An increase in the amount of information available to and from workers requires them to have computer skills and be "knowledge" workers.
    With close to 70,000 contact centers in the U.S., profits are being "squeezed" and answers are being sought.

The India Advantage
Indian outsourcers are encouraged to challenge U.S. companies on quality and productivity. India has a large resource of computer skilled, technically literate individuals, people who can think independently and have college degrees and/or engineering skills. They have world-class institutions that compete favorably on quality and productivity metrics. They are challenging U.S. outsourcers, claiming that their contact center agents are better, smarter and more effective, at a lower cost per transaction. India's supply and demand economics, with 300 million workers, 2400+ educational institutions and a high degree of literacy, makes for a compelling argument. On the price side, an average inbound, outbound or Web support program in India costs $18 to $20.00/hour, compared to $33 to $38.00/hour in the U.S. Touting savings of 40 to 50 percent, U.S. businesses are taking notice. And, as the cost for telecom services continues to go down, contact center cost will be even more competitive.

India's Contact Center Market Is Growing
While this is all just beginning, the growth has been dramatic. Let's look at customer interaction services, including call centers and customer support centers. These were prime areas of growth during 2000-01. In fact, customer interaction services continued to be the highest growing segment within this sector with a growth of 112 percent over 1999-2000 and revenues touching $190 million in 2000-01 from $90 million during 1999-2000. And this growth will continue, as long as U.S. businesses face economic pressure to do more with less and the Indian contact center proposition is favorable.

What About India's Infrastructure?
We've all heard about the growing market and how infrastructure is lacking. But, India today is moving beyond the requisite infrastructure, in the form of telecommunication networks, international gateways, ISPs, ASPs, software technology parks, etc. They are building a fiber optic SDH/Sonet ring network (Reliance Industries is deploying SDH/ Sonet ring technology between 115 cities), with ready technology and bandwidth capabilities to enhance software exports and provide outsourced contact center support for voice, video and data.

India is well connected to the international networks with abundant bandwidth through undersea optical cable and broadband satellite links.

Some important initiatives taken by the Indian government include:

  • Announcement of the Information Technology Act 2000 -- heralding a cyber law regime in the country,
  • Permission grants to private ISPs to set up international gateways,
  • Initiation of the National Internet Backbone,
  • Complete non-monopolization of undersea fiber connectivity for ISPs,
  • FDI (Foreign Direct Investment) has been allowed in B-to-B e-commerce, telecom and IT-enabled services.

What About Technology And Tech Support?
All the major suppliers of contact center technologies (hardware and software) are well established in India with pre- and post-sales support. Most of these companies have also set up multimillion dollar development centers in India.

The following companies, along with local system integrators, provide round-the-clock support.

Nortel Networks, Avaya, Alcatel, Siemens, Quintus, Dialogic, Aspect, Siebel, Cisco, Convergys, Corepoint, Rockwell, ServiceSoft, Servion, Interactive Intelligence, Davox, AnswerSoft, Edify, Genesys Labs, IBM/Lotus, KnowledgeX, Microsoft, Multilink, Netcentric, Netphone, Oracle, Parsec, Scopus, SITEL Corporation, SpanLink, Sun, Vantive, Venturian, Voicetek, etc.

The abundance of software talent in India has made customization of software for CRM implementation, contact centers, etc., possible, which has added reliability to the entire IT-enabled services operation and made the services more cost-effective. This has helped in reducing the lead-time for launch of services/operations.

What About Manpower?
Here are the facts about manpower:

  • A huge pool of English-speaking and computer-literate graduate manpower catering to the growing demand for professionals for all front-/back-office services,
  • Call center agents are trained by some of the best training companies for phonetic, regional accents and local culture of the client's country,
  • Agents undergo special training to understand the client's products, business needs and process,
  • All agents, supervisors and contact center managers are trained to the industry's best-practices standards,
  • Cost of skilled and quality-conscious professionals is among the lowest in the world. Salary costs in India are sometimes only one-tenth of the salaries of other developed nations.

India has 24 companies at SEI CMM Level 5 assessment. It is important to note that only 49 organizations across the world have acquired such assessment.

People And Vendor Sophistication
A study by McKinsey, which ranked India behind the U.S. and the U.K. but ahead of Germany, France, China and Ireland in a comparison of people sophistication (labor pool, costs and skills) and vendor sophistication (number and quality), illustrates that high-quality manpower and attractive price performance has been the key component of India's value proposition. However, its new value proposition to customers and investors is centered on increasingly sophisticated capabilities of Indian vendors. According to McKinsey, India will continue to have a growing number of vendors successfully working on complex projects across all areas of software and services, and performing successfully at levels comparable to those of leading global players.

What Should You Look For Before You Decide?
Corporations use call center outsourcers for good reason: cost control, access to expertise, state-of-the art technology and minimization of capital investment. Indian call center outsourcers need to provide customer care services that equal or out-perform U.S. counterparts to make their offer attractive. A "competitive challenge" should be a part of any business strategy evaluating an Indian company. Customers are the most prized possessions of the operation and Indian contact center support programs need to address several key issues on a proactive basis.

The following is a guide to help your business proactively address the selection process in working with an Indian contact center outsourcer. I call it the "Lucky 7 Benchmark."

  1. Financials -- Make sure you ask for a complete review of their financial condition and performance over the past three years. While many operators have just started in the business, you will find many companies that are subsidiaries of much larger companies.
  2. Management -- Have they done this before? Go with professionals that have experience. Even companies that have just started should have a core team of professionals that have experience in inbound, outbound and Web applications. Make sure they have a sales, marketing or account management team in the U.S.
  3. Facilities -- Have them answer fundamental questions regarding facilities, power, roads and conditions, and worker transportation. It is imperative that they have backup power and a telecommunications infrastructure.
  4. Technology -- Get a complete overview of software, hardware and practical examples of how they are using CTI, IVR or CRM-based applications. Make sure they have the predictive dialers, VRUs and a LAN/WAN that enables you to view information electronically/via the Web. It is important that you are comfortable with your ability to view reports and monitor the operation on a daily basis.
  5. Telecommunications -- Have the company address issues surrounding redundancy, site location, local-loop fiber/microwave and VoIP. Have them overview U.S.-managed services capabilities for handling data transmissions, toll-free routing, outbound dialing, VoIP. Have them provide you with a sense of security and assurance in their ability to handle and complete calls under all conditions.
  6. Human resources -- Have them overview their recruiting, training, motivation, staffing, scheduling and retention programs. Have them address issues regarding accent neutralization and writing (syntax) skills. Make sure that you have a say in hiring the staff and training them. Have them go through their classroom training programs and ongoing certification programs.
  7. Process/reporting -- Get a sense of security and control regarding the transmission of data, monitoring, on-site review of facilities, billing and reporting. Get assurances that they are going to meet or beat your QOS metrics and performance standards in advance. Get a good understanding that they can address improvements needed, based on service levels, quantitative or qualitative data. See if they offer remote monitoring and/or Web cam capabilities to watch center activities.

The Results Are What Count
By outsourcing IT-enabled services requirements to India, large overseas companies, including an increasing number of Fortune 500 companies and existing overseas service providers, are not only achieving significant benefits in cost, quality and time, but also creating platforms for building new businesses. Overall, these benefits are due to the advantages offered by relevant skill-surplus economies.

India's value proposition is already leading IT-enabled services hubs such as Ireland and Singapore to back-end their operations in India, since skilled labor is becoming an increasingly scarce resource in these countries. To top it up, telecom infrastructure is increasingly becoming competitive in India. Coupled with active support of state, India is offering a hard-to-beat proposition to emerge as a "Preferred Global Hub."

Finally, companies have discovered new business opportunities in the skills they learned from operating IT-enabled services. GE Capital is now planning to extend its services beyond financial services to other GE group companies as well as to external customers. If you are evaluating cost and determining how to "do more with less," you also might consider India. But, before you do, get someone to help you evaluate your options. It's a long way to India and you need someone to help you navigate the issues.

Keith Fiveson is managing director and CEO of The ITES Alliance, which provides call center consulting, outsourcing, training and marketing services to U.S. companies looking at offshore site selection options.

[ Return To August 2001 Table Of Contents ]

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