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Media
Publication: India Daily
The End of
Call Center Entrepreneurship
By
Richard Mills, Chairman
Chalre
Associates
 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 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 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 they say in MBA School. 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: XMG Global IT Research and Advisory Inc. prepares
highend 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. Cap Gemini 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 Philippines.
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-anyone-can possibly- imagine-as-being-outsourced
outsourcing."
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 rejoice.
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