Survival in the Indian call centre market
Within five years, the rapidly growing Indian call centre outsourcing market will be dominated by large Indian IT conglomerates, smaller Indian specialists, and large Western multi-national companies (MNCs) that are using India as a base for their business process outsourcing (BPO) practices, according to independent market analyst Datamonitor.
Newcomers to the market are already employing aggressive strategies, such as hugely discounted services, to secure their own share of the US$400 million market. However, Datamonitor's report, Indian Contact centre Outsourcing: Surviving the Shakeout, asserts that this development will lead to shrinking margins, and questions as to who will survive the inevitable 'market shakeout'.
The report focuses specifically on the competitive dynamics of the constantly evolving marketplace, and predicts that in two to three years' time the industry will see a shakeout, driven largely by consulting companies exiting the contact centre outsourcing market, and spinning off their contact centre operations or turning over management of their customer care offering to other third-party outsourcers.
Easier labour Although contact centre staff attrition rates in India have risen from 25% to 30% over the past year, Indian call centre agents earn an estimated $2700 a year - fully 60% less than the average Western call centre agents. By contrast, staff turnover rates for American contact centres average 90% each year. Indian contact centres have access to over 250 million English speakers and, perhaps more importantly, a pool of some 15 million Indian college graduates each year.
In addition to auxiliary training provided to all agents, call centres in the region are also well equipped with the latest technology. India's temporal positioning of 4-5 hours ahead of Western Europe and 10-13 hours ahead of North America makes it an ideal location. According to Datamonitor, most outsourced Indian contact centres currently operate during the evening in order to handle the load of European and American calls (78% from the US, and 18% from Europe).
Growth forecast But, according to Datamonitor's estimates, there are currently more than 250 contact centres and 51,000 agent positions in India devoted to offshore outsourcing. As additional capacity is needed, the number of contact centres and agent positions will grow at a compound annual growth rate (CAGR) of 9% and 19% respectively to reach 387 contact centres and 121,000 agent positions by 2007.
In terms of industries using outsourced Indian call centres, financial services (53%), technology (27%), and retail (6%) are currently the top three. The majority of traffic being outsourced to India is service related, and customer service and helpdesk activities combined account for 61% of total outsourced traffic.
However, Datamonitor expects the growth in both outsourcing contact centres and agent positions to begin to slow in 2005 as a result of an inevitable industry vendor shakeout that will come as a result of over-supply and shrinking margins from competitive pricing pressures.