No one likes a know all. Least of all me. But as The aardvark is one of the first animals in the alphabet I would like to claim credit to being the first to predict that India would go through the same cycle of staff churn and subsequent loss of quality that UK Call Centre’s went through in 1990s.
In 2003 I had the priviledge to be global guest speaker at the African Call Centre Conference held in Johannesburg.
I have to confess that my speech was very pro Africa in terms of its opportunities in the global market and it was there I predicted the demise of India as a sustainable outsourced call centre hotspot. I felt that the expansion of call centres in the far east in particular India was a short term gain and the behaviour of those wishing to go offshore similar to that of the East India Company 200 years ago.
I held the contention that flimsy business cases and even poorer benefits realisation plans had hindered a true debate on this subject. I also held the view the offshoring to India did not give sustainable benefits. I am in danger of being proved right!
I was digging around at home and found the conference notes and associated with that a paper I wrote to accompany my speech. What prompted me to make the search was an article from the USA Time magazine that said:
“Call centers are symbols of India's economic boom. With Anglicized names and feigned Western accents, Indians handle credit card problems and troubleshoot computers, collect debts and conduct customer satisfaction surveys. Over the past decade or so, relatively high salaries in the call center sector have attracted thousands of applicants across the country. But now the boom is going bust because India's college graduates and young job seekers just don't want to be bothered with the business anymore”
The report went onto to claim that the USA could now provide UK Call Centres more cheaply than India following the wage inflation that mirrored the UK in the 1990s,
There are some within the Contact Centre industry who believe that this is a unique business. Well in some respects it is because every transaction is different. Every customer problem/sale is different however like most commoditised business change happens.
The history of the contact centre industry is following a similar pattern of say Ironworking. Iron working was first introduced to Greece as early as 1200 bc. Iron replaced bronze. A metal almost exclusively in our minds as the lad/girl who comes third, better than 4th in sporting events. In Britain the Iron age lasted from circa 800 bc until the 5th century.
Iron was the backbone of metal production right into the 19th century and was claimed to be the there at the start of the industrial revolution. Shropshire and Monmouth became known for iron workings and Iron was king.
The 19th century saw the onset of better and cheaper materials such as steel. Mass production centres grew up taking away the smaller unprofitable elements and huge cities such as Sheffield grew big and rich on this change.
In the 20th Century Iron was a low grade product as in the UK we transported coal and iron ore to huge plants in Scunthorpe, Port Talbot and Llanwern.
These in turn realised that in 1990s the Global market Steel could be made more effectively, cheaper even when you include shipping costs in the far east.
Now full circle steel manufacturing is returning to the UK on a smaller scale as costs in the Far East reach natural post exploitation levels.
In 2003 I predicted that the Contact Centre market in India would follow a cycle similar to that of other industries. Seven years on it looks likely that the days of India being a relatively cost effective option where staff turnover is low and quality is sustained becomes a thing of the past.
i share with you my paper of 2003 and invite your comments.
Forget India for outsourcing say hello to Africa! This paper and presentation was made to the African Call Centre Conference in 2003.
Nigel Gooding, MCMI outlines his own unique view of the Global expansion of the Call and Contact Centre market and the opportunities for Africa
In 1991, as a bright new Graduate of the British Railways Management
Training Scheme I had my first experience of the Call Centre World. Hoisted into the lofty position of Station Manager, British Rail at Brighton along with management responsibility of 12 railway stations, 40000 passengers a day, 200 staff and a turnover of £35 million I had the responsibility for what I now know as a Call Centre. There were 24 seats, key and lamp telephones, no computers and reams of railway timetables that were well thumbed from overuse by harassed staff. A steam Driven ACD which did not have the functionality to handle more than 22 simultaneous calls despite the fact there were 24 seats! The centre lacked information on the abandoned call rates or the engaged tone statistics, which we could use to brow beat the over worked Telephone Enquiry Bureau Manager. The staff who worked in the Telephone Enquiry Bureau tended to be misfits, staff who had been made
redundant, ill health employees or staff who had been disciplined and moved from more traditional railway roles with very little training, development or selection criteria being applied. However, this TEB was a beacon for the railway industry and leader of modern customer friendly interaction.
‘In less than 4 years the Call Centre revolution was complete’
In 1995, I found myself back in the Call Centre World, as the National
Retail and Sales Manager of a Train Operating Company, now known as Virgin Cross Country. This was a company which outsourced it’s whole retail, sales and call centre operation to other train operators, travel agents and an internal British Rail outsourcer of Call Handling “RailDirect”. My first visit to RailDirect was evidence that Call Centre revolution had commenced, 250 seats in the heart of Call Centre land, Newcastle in the North of England. Workstations had replaced desks, all with computers and modern telephony headsets. The Centre boasted a state of the art ACD, 400 lines with the ability to stack calls and find the nearest available agent.
Computers and an up to date online database of timetable information had replaced paper timetables. The centre utilised national numbers, which can route calls by dialling location. The terms cross and up selling, inbound ticket sales & ordering and fulfilment had replaced answering the phone.
New assessment criteria for entrants had replaced the “sin bin culture” and a new training regime had swept through the industry. I will never forget that introduction to the Contact Centre revolution. In just 4 years the industry had moved from a passive “nice to have” to an important customer service and sales tool which every 1990’s company needed to compete in this newly emerging global marketplace, driven by the new global technology “the internet” and the need to reduce costs.
I now look back and applaud the pioneers of the 1990’s, the companies with vision to ensure that they were not left behind in the servicing of their customers through a dedicated contact centre network.
In just four years “key and lamp” had disappeared and;
· Call Centres had become an integral part of the sales marketing mix of many companies
· Contact by phone was cost effective and of course able to offer real time solutions to both customer and business and able to respond to the 24/7 culture we now take for granted.
· An example of this change was that British Gas Trading, the UK’s
largest energy provider was able to close its entire High Street retail
outlets and deal solely with its huge customer base by post or phone.
· The economies of scale of macro sites located in areas of high
unemployment and attractive relocation grants saw many businesses seize on the opportunities of relocation.
· There was a micro migration away from high cost locations such as
London to the North of England.
· Technology was available which allowed call routing and switching
regardless of location. Location was no longer a deciding factor on the siting of call centres.
· The third party outsourcer was born, with the skills, ability and
knowledge to deliver high quality call handling at a fraction of the cost of in house operations, initially handling low risk non regulated markets and progressing to dealing with the “tough end” of the marketplace, outbound telesales and telemarketing. (These included Merchants, Sitel, EDS, ClientLogic)
· The development of the “Call Centre Hotel” concept
The growth of the UK in house and outsourced Call Centre industry throughout the very prosperous 1990’s and the early 2000’s was primarily down to the realisation that failure to keep pace with customer demands will see decreased levels of customer satisfaction and of course reduced sales affecting shareholder bottom line. The 1990’s are history as today Call Centre World is dominated by fantastic opportunities, brought about by the communication revolution by high-speed voice and data connection and the universal adoption of the Internet to the marketing mix. The Call Centre has given way, like it’s predecessor the Telephone Enquiry Bureau, to the Multi Channelled Contact Centre where agents are able to answer customer enquiries both in and outbound, web chat and answer e mails and correspondence during the course of their shift.
However, at the height of this evolution in the UK Call Centre industry was not all rosy. The rapid growth in Call Centres saw quantity exceed quality as agent numbers were squeezed by a prosperous economy, high agent churn rates and the lack of an available work force as unemployment virtually disappeared. In addition there was a major shortage of skilled middle managers and no formal coaching and training for these vital post holders.
It is my submission that the growth of the global market place, combined with the failure of the UK and other Western marketplaces to adequately deal with the problems created by their growth, has allowed a fantastic opportunity for the Global outsourcing of business to the New World. The revolution in overseas outsourcing assisted by technology improvements, allows those Nations with a lower cost base to make a case for overseas outsourcing of not only calls, but also back office activities.
Since the late 1990’s the outsourcing of key customer service functions
overseas to Asia has been a key debating point in Boardrooms of Western
Europe and the USA. The growth has not only been in the rush to enable in house call centre operations to service new homegrown markets but the huge growth in the outsourced contact centre. In the European Economic Community Area (EU) not a week passes by without a story of a major EU company outsourcing elements of its back office or call centre operation overseas.
Abbey National is considering plans to outsource its call centre and
administration operations to countries such as China and India. 19-Jun-2003
In recent weeks British Telecom has hit the headlines in closing a number of UK based call handling sites and relocating to India, joining Prudential & Orange. Industry insiders love figures; the headline figures of £465 million worth of business will this year be outsourced to India. The American Analysts, Gartner forecasts the Worldwide expansion of outsourced activities, estimated at $520 billion market in 2000, will reach $696 billion by 2005.
Forrester the USA analysts claim in a recent report that some 3.3 million USA Call Centre Service jobs and $136 billion will be lost to overseas competitors which will include the likes of Barbados, Jamaica, Ireland, Malaysia, and South Africa all offering a real low cost alternative.
This expansion is currently attracting interest in many European and USA companies, primarily by the Financial Directors. With total payroll costs making up 70%-80% of the total operating costs a potential cost saving of 60% on operating costs of a large contact centre is enough to ensure a healthy discussion in boardrooms across the Western World. The attractiveness of a Country which can offer a low cost base, English speaking business culture, strong technology and educated labour pool thus, reducing operating costs, equating to higher profits and a competitive edge.
Any company who fails to realise that their operating costs can be slashed by 60% will not be in business for much longer as competitors seize on this saving. This recent analysis by contactbable.com shows the cost savings that can be made.
INTERACTION TYPE AVERAGE COST
Automated email £0.17
Web self serve £0.30
IVR £0.70
Telephone agent (India) £1.60
Assisted email £1.70
Text Chat £3.20
Telephone agent (UK) £6.50
However, many boards would not only look at cost alone. It is a brave
company who invests its whole business strategy in one overseas location.
An example being India where tensions with Pakistan run high and the threat of a localised war would have a devastating effect for those who had put all “their eggs in one basket”
How can Africa benefit from this global expansion?
With cost being a predominate driver I have taken time to examine a key
contender in the global marketplace. South Africa can now compete on terms with the best. South Africa can offer Costs savings in the region of 60% of those in the UK. Political business stability, high unemployment in some areas combined with low attrition, excellent first World national electricity and telecom, and an attractive exchange rate, all allied to a European time zone, a mature home grown call centre market place bigger than India, Scotland, Wales and the Philippines, and a deregulated telecom infrastructure, gives them a fantastic opportunity to develop in the New World.
However, to compete for this global marketplace, South Africa has a number of negative perceptions, which will be hard to shake off. They include inflation, perceived high crime rates, though personal experience in Johannesburg shows this to be no different than any other major City, and a relatively small-outsourced contact centre market place dealing with overseas calls. In addition the new laws on employment and ‘black empowerment’ pose some interesting challenges for Contact Centre operators. Whilst some may argue that the “reduced” costs in operating through lower wages is an ethical issue this argument will not affect the largest corporation in effecting significant costs savings, which can be passed onto
the customer and increase shareholder value.
Opportunities for the New World?
It is my contention that we are already seeing the effects in some countries of the problems that beset the UK Call Centre Marketplace in the 1990’s.
India is currently suffering the same problems as the UK in the late 1990’s, where the migration to the North of England from the South was driven by high attrition rates and reduced operating costs. Agent churn was high and the available marketplace of available workers had dried up by the late 1990’s leading to localised wage inflation. The skill shortage of middle managers was evident in the immature call centre economy. In addition, the performance of some outsourcing providers in overseas Countries has mirrored the quality downturn experienced in the UK in the late 1990’s where quality was forsaken for delivery, after all can a company who previously owned a chain of garages be expected to successfully operate an outsourced contact centre? In addition staff in these countries where significant time differences occur have complained of shift patterns which are unfriendly to family life (12 hours difference in some cases)
In conclusion offshore contact centre deployment is here to stay and is a natural extension and organic growth to the mature homegrown marketplace, but be warned nothing ever lasts forever! Seize the opportunity presented.
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