Publication: ComputerWorld USA
Wants Call Center Capacity
Richard Mills, Chairman
couple of months ago, IBM announced that it was purchasing Daksh e-Services,
a 9,000- person call center with operations in India and the Philippines.
The acquisition is interesting for two reasons. First, IBM previously had no
significant call center capacity and with this one purchase has become a
major player in the booming offshore industry. Second, the price IBM paid
was considered by most people to be irrationally exuberant. According to
investment banking firm Avendus, the price was roughly 15 times Daksh's
earnings last year (or three times annual revenue). Clearly, IBM felt that
owning (rather than just leasing) call center capacity was an absolute
necessity for its long-term business strategy.
Earlier in the year, Accenture
hired a senior call center executive away from contact center company ICT
Group. When I spoke with this executive about his new job, he said he was
hired to be "responsible for the world's single largest call center
offshore initiative," which involves 6,000 call center seats.
Apparently, Accenture is moving into the call center business in a big way
Traveling in the opposite
direction, the large call centers are moving into the IT services business,
although in a somewhat less grandiose manner. Sykes Enterprises is a
worldwide contact-center organization with many service lines, including
managing technical support for clients such as Microsoft and Intel. It has
done such good IT support work that it has moved into full-blown IT
outsourcing. In the Philippines, Sykes is hiring software developers by the
hundreds to do software programming work for its blue-chip clients.
Convergys, another large contact-center organization, has hired ICT
heavyweights to oversee the company's information management group. Its
objective is to focus on developing the company's "higher value service
offerings" in the IT and business process outsourcing (BPO) spheres.
Meeting in the Middle
Another area of budding
togetherness for IT and contact center services, BPO is considered the
mother lode of outsourcing because it encompasses everything that can be
imagined as being outsourced. It's a very big field.
A quick look at the Accenture
Web site makes that company's direction clear. It now provides 18 categories
of services. Some of the new BPO subsidiaries that have been incorporated
over just the past few years are Accenture Finance Solutions, Accenture HR
Services, Accenture Learning, Accenture Procurement Solutions, Accenture
Business Services for Utilities, Accenture eDemocracy Services and Navitaire
-- a bewildering number of extensions to the core Accenture brand.
IBM's approach is to keep all
BPO work under a single company umbrella, but its BPO focus in the booming
Asia-Pacific region is obvious based on its hiring practices. For example,
full-page employment advertisements in the Philippines are being used to
hire the boatloads of people required for IBM's outsourcing operations. The
advertisements emphasize the need for "previous experience in the areas
of customer care, human resources, employee and payroll services."
Requirements for IT skills are stated farther down on the page, giving them
the appearance of being an afterthought.
On the call center side,
Convergys is promoting services like billing and employee care (payroll,
benefits and other HR services). Sykes says it delivers "total
solutions" to "complement" its CRM services. Large call
center StarTek is probably the most bold; it comes right out and calls
itself a BPO company.
So, what's going on? Why does
everyone want to be in one another's business?
There seem to be two main
reasons these companies are broadening their product lines into areas that
are clearly outside their core areas of expertise. The first has to do with
customer requirements. Large blue-chip clients no longer want to buy bits
and pieces of services offerings from a jumble of separate suppliers. It's
just too complicated and expensive to manage it all. They want to purchase a
broad range of outsourcing services from a few suppliers (or even just one).
This trend has been happening in
the IT sector for some time now. According to Gartner and most of the other
major analyst companies, large outsourcing deals have been the "main
engine of growth" over the past couple of years, and this trend is
expected to continue.
Escaping commoditization is
another reason companies are expanding to new frontiers. The most successful
IT firms have become so large and their project management procedures so
reliable that, to a large and sophisticated client, their services offerings
can be difficult to distinguish from those of competitors. In other words,
they have become commodity providers -- not that much different from farmers
selling pork bellies. This situation has been apparent in the call center
industry for some time. The IT companies, on the other hand, aren't used to
thinking of themselves in such a manner and probably don't like it very
much. But what unique selling feature could there possibly be among high
quality companies like Accenture, EDS, HP, CSC or IBM, other than price?
seems exciting because it's new to everybody and industry standards for
service levels and pricing aren't yet well developed. As a result, the sales
process is more consultative in nature (rather than just a discussion of
price), and there is much more value to add.
In such an environment, the
opportunities for higher margins are greatly enhanced -- something any
salesman would appreciate
.Where Will It All Lead?
It's very evident that both the
large contact-center companies and the IT services organizations will
continue to expand their product lines into BPO and each other's businesses.
However, it's the IT companies and not the call centers that sign the big
outsourcing deals -- anyone who reads the business journals knows this.
Announcements for billion-dollar outsourcing contracts are becoming almost a
biweekly occurrence for IT professional services companies.
In addition, my information
indicates that throughout the fast-growing Asia-Pacific region, it's almost
always the IT companies that are looking to acquire call center capacity
(i.e., buy call center companies) and seldom the other way around. If the
past is an indicator of the future, then a lot of people in the call center
industry might soon be calling themselves geeks.
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