Publication: ComputerWorld USA
The End of
Call Center Entrepreneurship
Flowering of Offshore Outsourcing
Richard Mills, Chairman
- There 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.
A recent one is Ambergris
Solutions Inc. in Manila. 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% of the top 15
Indian business process outsourcing start-ups 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
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 eServices Pvt. Ltd. in India and numerous
others, shows that the call center sector is now exclusively a game for
big-boys -- it has become a "mature industry," as MBA holders
might 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 justvin the
Manila area: XMG Global IT Research and Advisory Inc. prepares high-end IT
research, YellowAsp Corp. creates layout designs for printed circuit boards,
Forssman Asia Pacific prepares construction design drawings, Key-In Data
Solutions does claims processing, Primesoft develops advanced Web
applications, VinciWorks designs online training programs, and 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 business process outsourcing
bandwagon too. CapGemini has large facilities in three locations in China
providing accounting and human resources outsourcing services. IBM's non-IT
outsourcing operations are quickly becoming larger than those of IT in the
A quick look at the Web site of
IT consulting giant Accenture Ltd. 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 Inc. 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 Corp. is now an "international business process
outsourcing provider." StarTek Inc. says it's a "global provider
of business process outsourcing services."
It's 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 phrase
"business process outsourcing" wasn't descriptive enough to
express the vast diversity of the current environment. He felt a better
phrase was something along the lines of "everything
So, we shouldn't be overly
concerned about missing the gold rush in offshore call center outsourcing.
The business process outsourcing mother lode is just around the corner, and
the opportunities are wide open. Greedy entrepreneurs everywhere should
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