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:
Customer relationship management (CRM) growth
has significantly contributed to the advance and
overall growth of the inbound.
E-commerce, B-to-B and B-to-C have also
contributed significantly.
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.
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:
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.
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.
Sincerely,
Nadji Tehrani
Executive Group Publisher
Editor-In-Chief
The
India Call Center Advantage: Competitive Options In A
Tough Economy
BY KEITH FIVESON
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.
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."
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.
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.
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.
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.
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.
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.
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.