Companies are moving their call centres abroad – and when the costs are lower and quality of service so good, why not? Ashleigh Lezard reports.

Richard from Manchester in the UK calls GE Capital’s helpline to request another copy of his store card’s monthly statement. It is a rainy, cold and grey Monday morning and his local football team, Manchester United, lost to Liverpool at the weekend. The call reaches a call centre that could be anywhere in the world. This one, like many others, is in Delhi, the muggy, bustling capital of India.

The call is answered by Anil. It is four in the afternoon and 35 degrees Centigrade. Anil and Richard have a long conversation about United’s poor performance and even discuss what happened in EastEnders, the UK’s favourite soap opera, last week. Richard has no idea he is talking to someone who is 18,000 miles away.

New era

Anil is part of a new generation of Indian worker who is likely to know what the scores are in both football and baseball matches depending on which country the customer is calling from. He or she will have been through a process of “accent neutralisation”, so no dialect or accent can be picked up. This may sound like something out of George Orwell’s dystopic novel 1984 but Anil is probably one of the two million graduates in India per year and the envy of his peers for getting a stable job in a growing industry, while 70% remain unemployed. Mike Havard, of UK- based call centre consultancy CM Insight, says that in India, “call centre jobs are the job to get, as there is unparalleled enthusiasm for the role”.

What is more, the agent will earn 95% less than his or her counterpart in Australia, the UK or Ireland, and will work longer hours, including night shifts. While staff retention in these countries is a major problem, India has little turnover. Peter Robinson, head of customer and client relations at GE Capital, says: “The inability to recruit sufficient and suitable resources in Leeds (GE’s previous base) was one of the main reasons for relocating to India.”

So it is no surprise that companies are moving their call centre and back-office operations to India, especially after widespread cost-cutting at the end of last year. “The globalisation of the call centre is inevitable. If you are open 24 hours a day, it makes sense to have staff in India rather than paying overtime in the UK,” says Tim Selleck, a call centre manager. However, it is a more complex debate – very often, a large multinational that wants to cut costs does not consider it good business practice to move all customer services away from the core customer base. If it does, there may be increased unemployment and a backlash in the home country.

Lucky for some

The downturn in some western economies is regarded as a blessing for the Indian call centre market, which experienced a slump at the beginning of 2001, despite huge investments made in the sector after deregulation of the telecoms market started in 1999.

Big companies such as Nortel, Amazon.com and Peugeot chose more expensive countries such as Australia, New Zealand and Singapore to set up operations. Mr Havard says countries such as South Africa, Malaysia and the Philippines are, like India, similarly tempting destinations.

“Of these, South Africa is ripe for review. It has similar time-zones, very high literacy and education levels, a low-cost infrastructure and labour, with good availability, westernised business practices, an opportune exchange rate and good English language skills,” he says.

Language link

Firms looking to cut costs move what are called business processing operations (BPO) to India and other Asia-Pacific countries. This not only applies to English-speaking countries but also to the Dutch, German and French markets. For example, French telecoms company Teleperformance has just opened a 150-seat call centre in Tunisia. German airline Lufthansa has opened a call centre in Cape Town, South Africa, due to the prevalence of German speakers. The airline is

a good example of a company that has kept its core call centres close to home – Kassel, Germany – and moved the overflow to other parts of the world. One thing is clear from these examples – language skills are vital, no matter how cheap the location.

Mr Havard says the benefits are not only financial: “So far, the call centre industry in India is avoiding many of the negative characteristics that have beleaguered the UK. They are outdistancing their UK counterparts in their commitment to rigorous, internationally recognised business process standards. All this makes for highly robust operations, with good working environments and strong personnel management.”

Rod Jones, an independent call-centre consultant in South Africa, emphasised in a speech to the South African call centre industry in May that “enthusiastic and well-trained staff are the very lifeblood of the industry. What is unquestionably required is a cohesive recruitment, training, placement and on-going skills development programme.”

How much can go?

There is a sound argument for moving to a country such as India. But Alex Kwiatkowski, a consultant for Ovum, a telecoms consultancy based in London, emphasises: “New markets are complementary to call centres in the UK or the US but not a wholesale replacement. Parts of the operation are outsourced to places such as India. Call centres in many cases are the first point of contact between a customer and a company, and that company will probably be relatively nervous about outsourcing to a country so far away.

“It is also important to remember that if a company has invested a lot in its own call centre, it will not move the entire operation somewhere else.”

It is usually the firm’s “lower-value” or back-office operations that require basic handling that are moved offshore. This ties in with the changing job profile of call centre employees in Europe and the US. Cuno de Haas, a consultant at Buck Consultants International in the Netherlands, says there has been an increase in the “value-added” functions of call centres. A recording of a phone call, for example, can be used to improve customer relations management (CRM) and give ideas to marketing and product development.

While Mr de Haas sees this happening in Europe, Mr Havard argues that India is way ahead in implementing innovative CRM solutions. He says the Indian outsourcing market is “a clear and present threat” to the UK call centre industry.

Workers in India are highly IT literate. A spokesman for Manpower in Delhi emphasises that the candidates are constantly trained in new technologies. However, Mr Havard does concede that there is a lack of a strong middle management layer in developing call centre markets.

Job cuts at home

CM Insight estimates that 20% of the 1.2 million call centre/back-office jobs will move offshore over the next couple of years.

All call centre operations rely on people to function successfully; and the possibility that there may be huge job losses in more developed markets is likely to cause problems. “The loss of thousands of jobs in the UK to India or any other country is going to cause an outcry,” says Mr Kwiatkowski.

This year, there have already been job losses in UK call centres. The collapse of ITV Digital led to more than 1000 redundancies. In Pembrokeshire, where more than 800 call centre jobs were axed, there is concern that the centre, opened in 2000, will not have a new tenant for some time.

The Welsh Development Agency, which is responsible for promotion of the site is “confident that the centre will attract a new tenant as it has excellent facilities” but the press is not so optimistic. For now, however, the UK government and the National Assembly are providing cash to help workers in an area with the second highest unemployment rate in Wales.

Mature market

This comes at a time when the call centre market in the UK and Ireland is maturing, according to a report by Deloitte & Touche, released in March this year.

“Overall project sizes are decreasing year on year. The rise in projects coupled with the dip in total jobs created indicates that the call centre industry in the UK and Ireland is maturing,” said Alastair Davies, a director at Deloitte & Touche, and author of the report. It shows that there has been a 21% fall in the actual number of jobs created by call centre projects in the UK and Ireland, although there was a 33% rise in the number of projects announced in 2001, compared with 2000.

A Datamonitor report, Call Centre Markets in the UK to 2003, also shows a reduction in the growth of agent positions from 1998 to 2002, from just under 25% to just over 5%.

Mr de Haas agrees that these markets are maturing. “Growth is decreasing but there is still some growth. The UK, Ireland and the Netherlands are mature markets while France and Germany are levelling out and places such as Spain and Italy are still growing”.

He goes on to add that in France international companies are increasingly focusing on smaller cities, away from the main business areas, for example American call centre firm ClientLogic established itself in Troyes, a small city in north-eastern France. “Call centre companies want to keep the market fluid and not saturate certain areas.”

The main attraction

The development of call centres in the UK and Ireland has tended to be in areas like Wales, Scotland and north-east England, which have traditionally had high unemployment. Companies were attracted to these areas by offers of incentives and tax breaks. Call centres in the early 1990s were heralded as an economic saviour for depressed areas after the decline of the manufacturing and mining sectors. In Ireland they were seen to be at the forefront of the launch of the “Celtic economy”.

However, just as manufacturing companies move to cheaper bases abroad, so is the service sector. Rising salaries, a more demanding workforce and more attractive incentives offered by developing countries are leading to the departure of call centres to countries such as India, although customers such as “Richard from Manchester” might not even realise it.