Wipro has a stake in a call-centre company. HCL Tech has a subsidiary in the business. And transnationals are increasingly setting up their own. Now, where's the room for small enterprise?

By Moinak Mitra

On October 18, while declaring the company's results for the second quarter of this financial year to analysts and the business press, Wipro Chairman Azim Premji and Vice Chairman Vivek Paul slipped in an announcement about a surprise acquisition. India's most valuable software maker was acquiring 17 per cent in equity and 7 per cent in preffered stock of call-centre company Spectramind for Rs 48 crore.

Eleven days later, on October 29, HCL Technologies, which entered the business on February 6, 2001, through a subsidiary eServe, announced the formation of a 90:10 joint venture with British Telecom to run a 400-seat call centre in Belfast.

That's bad news for Mr Gupta. Mr G, the chief exec of an international call centre who'd like to remain unnamed told this correspondent, is a self-made shirt tycoon. One day, the CEO received a visit from the portly 40-something exporter. ''Sign on as a director in my new company,'' exhorted Mr G, ''and I will fill your hands with gold.'' It didn't take long for the man to find out why Mr G was so keen to have him on board; he wished to put up a call centre. The reasoning behind this decision? ''I've invested Rs 35,000 per sewing machine; each machine sits on a 2.5 square feet table; and I have it on authority that I can increase my returns 300 per cent by investing the same amount in a call centre.''

Mr G may belong to the realm of apocrypha, but fact is, call centres were the great white hope for everyone who hoped to make it big in the turbulent 2000s. The domain attracted all kinds: angel-funded Defection Capital, like Raman Roy who left GE's call centre ops in India to start Spectramind; entrepreneurs trying to regain their past tech glory, like DCM Data Products' Veer Sagar who went the medical-transcription way; software hotshops, like HCL Tech and TCS (it has a JV in the call centre business with HDFC) keen not to miss out on a possible revenue stream; transnationals like Conseco's EXL Service; even cash-rich corporates like the Emami group and the Hero group, looking for diversification opportunities.

Meanwhile, the business itself has acquired enough aliases to do a fbi-10-Most-Wanted lister proud: it-enabled services, business process outsourcing, and back-end processing. Irrespective of the name, though, each company was (and is) in the same business. And that was leveraging India's time-zone advantage (it is day here when it is night there), and huge pool of cost-effective graduate and post-graduate labour to do what are, at the end of the day, fairly mundane and routine tasks. In some cases it was all about following up on credit card payments; in others, answering customer queries; in still others, processing insurance claims, maintaining books of accounts, or transcribing medical records.

There was reason enough for the sector to boom: a study conducted by International Data Corporation (IDC) for the National Association for Software and Service Companies (Nasscom), estimates revenues from it-enabled services to contribute Rs 4,800 crore ($1 billion) by 2005. And a recent report by research firm Frost and Sullivan puts the size of the business today at Rs 1,146 crore ($244 million). Compared to projections on India's total software exports in 2001-02, Rs 40,000 crore, that may seem like chump change, but it is the growth rate, 30 per cent, that served (and continues to serve) as a magnet for companies.

But the entry of serious software players into the sector bodes ill for small-time entrepreneurs hoping to make a quick buck with 50 or 100-seater call centres. And as India's competitive edge in the business (cost, cost, and cost) starts to pale marginally, continuing competition from countries that have traditionally housed call-centre clusters-Canada, UK, Ireland, and Australia-is starting to tell. For Sujit Bakshi, the chief executive of hcl eServe Technologies, it is strangely reminiscent of the past. ''In 1985, the government gave permission to 130-odd pc manufacturers to sell their PCs. Today, only two survive.''

Country-competitiveness (See How the Countries Stack Up) is only one reason for the impending shake-out in the business. Funding is another. Starved of good dotcom and tech investments, several venture capital firms invested in call centres. But the slowdown in the US-the main market for Indian call centre services-has only served to lengthen the already long gestation period in the business.

Then, there is the issue of scalability. ''If you cannot convince the client that you will be able to ramp up fast, should the business demand it, there's no chance of any business coming your way,'' says Samir Chopra, the founder-President of Cybiz, a 100-seater call centre located at Gurgaon (near Delhi). But while all these matter, the one thing driving the shakeout is the very characteristic of the call centre business.

The typical Indian call centre charges customers between Rs 384 and Rs 576 ($8 and $12) a hour (per seat) for providing e-mail services, Rs 720 and Rs 864 ($15 and $18) a hour for real time chat, Rs 875 and Rs 1,680 ($25 and $35) a hour for voice-based services, and Rs 1,680 and above ($35 upwards) for technical help. The last includes value-added business process outsourcing activities such as processing insurance claims, mining customer databases for information and maintaining books of account. Operating margins vary from as less as 15 per cent for low-end e-mail contact centres to 60 per cent for bpo-centres. Ergo, the only way a company wanting to succeed at the low-end of the business can do so is by building up its volumes.

Therein lies the catch; it takes between Rs 8 lakh and Rs 10 lakh per seat to put up a call centre focussed on the international market. That works out to around Rs 10 crore for a 100-seater, and that amount doesn't include the operational costs. ''Indian companies need to build outstanding management teams, be adequately capitalised, and have extensive human resource orientation to succeed in the business,'' says Sanjeev Aggarwal, CEO, Daksh eServices, a company that works out of three offices in Gurgaon (combined capacity: 1,500 seats) servicing clients like Amazon.com.

Logic Of Success

Success at the higher end of the spectrum isn't dependent on volumes, but it is a function of skills and technology. That's why, says Srikant Shastri, the Secretary-General of the Call Centre Association of India and the ceo of Solutions, a call centre focussed on the domestic market (yes, it has global aspirations), ''it makes sense for a software company to venture into the business than someone else without the requisite technical expertise.''

For the MNC deciding to 'make' rather than 'buy', there's enough logic to invest in a fully-owned, or part-owned call centre. It's easier to outsource a critical process to a division of the company than a rank outsider and often, investments made by MNCs in call centres in India end up being more lucrative than those made by them in their main lines of business in the country. GE (which runs the largest call centre operation in the country with 9,000 seats), American Express, and British Airways have discovered this to their benefit. As has US insurance major Conseco, which wholly owns the NOIDA-based EXL Services. The larger companies are also better equipped to deal with attrition, which industry-insiders put at around 40 per cent. ''The trick,'' says Raman Roy, President and CEO, Spectramind, ''is to reduce attrition by making the company a fun place to work.'' Roy also has the advantage of heading a business that is focussed on the high-end business of knowledge services.

Does it make sense to focus on the domestic market at all? It does, but only if the company's objective is limited either in terms of investment, or vision, or both. Ishita Swarup and Tina Sapra run the Rs 3-crore Orion Dialog, a call centre operation catering exclusively to the domestic market. While their returns aren't anywhere as high as those of centres targeting customers in the US, they do service clients like AirTel and Nokia, and make a reasonable go of it. As the domestic market evolves, especially in areas like banking, insurance, and financial services, the number of call centre seats devoted to the domestic market (around 5,000 right now, according to the CCAI) could increase.

It's unlikely that India loses out on its country-advantages in the business anytime soon. In businesses like claims processing and accounting, the country boasts a time-zone advantage that suits the US, the main market for such services, fine. In other information technology-enabled businesses, it enjoys a significant labour-cost advantage. But as the business becomes more capital- and technology-intensive, the Indian market for it-enabled services will increasingly become a playground for the big boys.

Issue Contents  Write to us   Subscription   Syndication

INDIA TODAY | INDIA TODAY PLUS | COMPUTERS TODAY | 
THE NEWSPAPER TODAY |  TNT ASTRO |  TEENS TODAY |  CARE TODAY
MUSIC TODAY | ART TODAY

© Living Media India Ltd