Publication: Chimo Canada
of Offshore Outsourcing
Richard Mills CFA, Chairman
have been few entrepreneurial ventures in business history as rewarding as
the offshore call center. Within Asia, there are numerous tales of
entrepreneurs who made tons of money for themselves by creating substantial
value for their customers and employees.
recent one is Ambergris Solutions in the Philippines. The company was
started a few years ago by three young entrepreneurs with little money of
their own and even less call
center experience. They had a lot to learn about running a call center, and
it took 18 money-losing months before they stumbled upon their first paying
customer. But over the two and a half years that followed, their business
grew explosively to almost 3,000 employees serving a roster of blue-chip
clients. A couple of months ago, controlling interest of the thriving
enterprise was sold to a large Canadian IT organization called Telus
International in a deal valued at $43.5 million. Many would agree this was
an adequate paycheck for just a few years of work.
This story gives the impression that starting a call center in Asia is an
easy path to fast riches. However, just a week or so after the announcement
of the Ambergris deal, Gartner Inc. released an astonishing report that
said, “As many as 70 percent of the top 15 Indian business process
outsourcing startups will cease to exist in the coming months.” Gartner
added scathingly that “despite the hype, only a small fraction of customer
service outsourcing will be done at offshore locations.”
Dropping like flies
The two situations might seem contradictory but they aren’t. Margins in
the call center sector have declined steadily over the past couple of years
as customers demand lower bill rates and agents insist on higher salaries.
The result has been a squeezing out of the smaller (and often newer)
operators, which are unable to spread their fixed costs over a larger base
of revenue producing agents. Throughout India and the Philippines, there
has already been significant rationalization (i.e. closings, buyouts,
mergers, etc.) in the call center industry, and Gartner is probably right to
say that more are to come.
The Telus purchase of Ambergris, like IBM’s purchase of Daksh in India and
numerous others, shows that the call center sector is now exclusively a game
for big-boys — it’s become a “mature industry,” as the MBA’s would
say. The days when someone could start a little call center of his own and
learn the business along the way are finished.
So what’s a greedy young entrepreneur to do now?
The pioneering efforts of the call center sector have proved that the
concept of offshore outsourcing can succeed exceedingly well — actually
manufacturing proved this years ago, but let’s not go into that. In most
large companies, however, answering telephone inquiries is a microscopic
part of their overall business. The big opportunities in business process
outsourcing are still to be realized.
This fact is shown in the diversity of the services offered by the current
batch of outsourcing entrepreneurs.
Here are a few examples of companies operating just in the Manila area in
the Philippines: XMG Global prepares high-end IT research, YellowAsp creates
layout designs for printed circuit boards, Forssman Pacific prepares
construction design drawings, Key-In Data Solutions does claims processing,
Primesoft develops advanced Web applications, VinciWorks designs online
training programs, Pulse DesignTech offers electronics design services. The
list goes on and on.
The large IT services firms and the call center companies are jumping on the
BPO bandwagon too. CapGemini has large facilities in three locations in
China providing accounting and human resource outsourcing services. IBM’s
operations are quickly becoming larger than those of IT in the Philippines.
A quick look at the Web site of IT consulting giant Accenture reveals an
astounding diversity of services. Under “Outsourcing” in the “Services
Offered” section there are Accenture Finance Solutions, Accenture HR
Services, Accenture Learning, Accenture
Procurement Solutions, Accenture Business Services for Utilities, Accenture
eDemocracy Services, Navitaire and Accenture Insurance Services. By
comparison, only two IT-related services are listed in the entire section.
Two of the world’s five largest call center companies don’t even call
themselves call center companies anymore. ClientLogic is now an
“international business process outsourcing provider.” StarTek says
it’s a “global provider of business process outsourcing services.”
It is clear that the difference between outsourcing today and outsourcing
yesterday is significant. Whereas before, just a few business segments were
growing rapidly (say call centers and IT), now there are multitudes in the
same situation with countless more sure to follow.
Some business leaders I have spoken to have used the phrase “tipping
point” to describe the current life-cycle stage of services outsourcing.
One fellow I spoke to thought the name “business process outsourcing”
wasn’t descriptive enough in expressing the vast diversity of the current
environment. He felt a better phrase was something along the lines of
“everything-anyone can- possibly-imagine-as-being-outsourced
So, we shouldn’t be overly concerned about missing the gold rush in
offshore call center outsourcing. The BPO mother lode is just around the
corner, and the opportunities are wide open. Greedy entrepreneurs everywhere
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