Me And Then Manila
21 March 2005
By Arindham Mukherjee
Me And Then Manila
Is India’s supremacy in the call centre space under threat from other Asian Challengers? If one goes by a new survey of the Asian call centre industry, the Philippines is emerging as the next big force in the BPO industry with huge growth in the sector in the last few years and a potential and infrastructure to take it higher.
The study which concentrates on four Asian countries-India, China, the Philippines and South Korea-States that as the call centre market enters a healthy growth phase in 2005, activity will continue to be concentrated in Asia. The survey, 2004 Call Centre Industry Benchmark Study: Dynamic Asian Markets, was commissioned by U US-based call centre and BPO consultancy Kelly Services and conducted by Sydney-based ACA Research.
Business in the region is expected to grow over 50 percent in 2005. And this growth, the researchers believe, will be led by India and the Philippines. “The two major outsourcing destinations in the region. India and the Philippines, continue to offer the best option with the lowest cost/ transaction at $0.30 and 0.32 respectively,” finds the report.
While the survey points out that India will maintain its winning ways through 2005 and be the most preferred destination for outsourcers, a stiff challenge is on from the Philippines which matches India’s advantages in almost every aspect in the call centre industry sometimes even performing better in certain areas. As expected, India’s flag lies high through the findings. The survey put India in the highest growth bracket in the Asian call centre scenario with an expected growth of 64 percent in 2005. This will roughly translate into the addition of over 1,10,000 cal centre seats during the year. Last year, India added 76,000 seats.
India, says the survey, has 324 companies operating call centres with a total of 1,72,000 seats at present. This is the highest in the Asian region followed by South Korea with 955 call centres and 1,09,000 seats, the Philippines with 162 and 31,000 and china with 525 and 49,000.
India also scores in having the lowest transaction cost in this industry apart from having the lowest hourly seat cost in the world. The cost per transaction in India is $0.30 while its hourly cost per seat works out to a mere $3.61. Against this, for South Korea, which is technologically superior to India, both transaction cost and hourly seat cost work out more than four times the Indian figure; $1.26 and $15.14 respectively.
Should India be worried about the rise of the Philippines in the ITES arena? Well, with its proximity to the US and western culture, it is developing faster that other Asian countries in the call centre space. This year, says the survey, call centre business in the Philippines is expected to grow by 53 per cent, adding another 27,000 seats to its kitty. Although these numbers look small on India’s canvas, the high productivity rate and low costs give the Philippines some competitive advantage.
The Philippines probably also has the highest agent productivity in the region. For instance, take the handling of all calls. According to the study, agents in the Philippines handle an average of 98 inbound and 107 outbound calls per day while the numbers for Indian agents are 73 and 78 calls respectively. China has the lowest rates of 61 inbound and 41 outbound calls.
Also of concern is the low salary levels the Philippines has been able to achieve in this sector, something that has always been an edge for India over all countries. Average full-time salary for agents in India is $2,074 per annum, while in the Philippines it’s $2,563. Against this, agents in South Korea are paid $15,496.
India also faces an unfavourable staff turnover of 31 per cent with 67 per cent of the job-switchers moving to other competing call centres. As a result, staff tenure in India is the lowest at just 11 months while it is the highest in South Korea at 24 months followed by 19 in the Philippines. This, analysts say, is a direct result of the high growth of the industry and the constant demand for skilled agents.
Says Dhirendra Shanthilal, VP & MD, Asian Operations, Kelly Services. “The high turnover and churn in the Indian call centre industry is actually weighing it down. Agents are always leaving one call centre to join another, which necessitates fresh training and results in loss of productivity. While salaries are going up, the loss of productivity puts India on a sticky wicket.” But the Philippines too isn’t very far behind. Its call centre sector has a pretty high staff turnover rate 20 per cent.
Also, Indian call centre agents require 24 days of training in a year on an average, which is 33 percent above the Asian average of 18. The number for China, despite its supposed language handicap, is 11. Also, the average Indian call centre operator takes sick leave for 15 days a year, the highest among the four countries studied. The Koreans appear to be the healthiest, with only three days off. Filipinos take to bed for eight days a year, and the Chinese six.
The Indian call centres industry, though, feels it will take the Philippines or any other country a long time to catch up with the kind of expertise and spread that India has Says Debashish Das, V.P. Keane WorldZen, which operates call centres in India. “We have moved up the value chain from pure labour arbitrage. Clients today see value in Indian companies. Today there’s a lot of value addition in India, which is not the case in other countries. Earlier, we did what our clients gave us. Now we develop processes for them.”
Prashnat Sahni, CEO, Technovate, which runs a large call centre facility, agrees; “India has some fundamental edges over the Philippines and scores in its position on the learning curve. Outsourcing companies today look not only at number of seats and infrastructure but the capability to provide total solutions through a mix of IT and BPO. India with its superior software capability is miles ahead of any other country in this regard. Add to this the domain expertise in areas like finance and insurance that we have developed over the years, which puts us on top of the BPO market.” There is also the fact that India has the second larges English-speaking workforce in the world outside the US.
Analysts also point out that political instability in the Philippines could negate most of the advantages of that country as multinational corporations would be wary of putting their money there. This is not the case with India as business is never fundamentally affected by political upheavals.
In all probability, India will remain the favourite of overseas companies. A recent Gartner survey revealed that the three main considerations for outsourcers were size, quality and cost. On all three counts, India is a clear leader. And with help from the software sector, the going could perhaps only get better.