A Passage to India

Apr 01, 2002 10:30 PM  By

Should you move your call center off shore? As with any business decision, it comes down to weighing risk and reward. On the reward side, the advantage of using an overseas call center is the same as importing goods from a developing country: It can be a whole lot cheaper. In India, the country most frequently touted as the next frontier for call centers, wages are about 20% of what they are in the U.S., according to Andy Shapiro, director of location strategies at Stadtmauer Bailkin Biggins, a consulting firm in Princeton, NJ. All told, Shapiro says, you can expect to pay about $2 an hour for a call center operator, including benefits.

And for that, you don’t just get someone who can say hello, but a college graduate who speaks fluent English. And not just any college graduate: Many call center employees have technical degrees — an advantage not lost on Dell Computer of Round Rock, TX, which opened a 600-seat help desk facility in Bangalore last May.

Dell is only one of many global companies that now have call centers on the subcontinent. GE Capital alone has over 12,000 operators standing by. John Oliver, a spokesman for GE Capital, says that in India, his company has found “a tremendously well-educated workforce that has a very refined work ethic.”

There is some wage inflation now, but experts say that industry consolidation and high unemployment will keep wages in the same range for the foreseeable future. That helps ensure a high retention rate — turnover is reportedly 15% or less, a far cry from U.S. turnover rates, which can reach triple digits.

A recent Datamonitor study found that a 150-seat call center that costs $5.6 million to run for a year in the U.S. costs about $2.2 million in India. Service bureaus can cut into that savings, of course, but even service bureaus promise savings of 25%to 35%.

But these savings aren’t necessarily all that easy to achieve. “People are really going to be earning their money in order to save it,” says Gary Cohen, president of ACI Telecentrics Inc., a Minneapolis-based service bureau that operates call centers in the U.S. and Canada and has revenue-sharing alliances with four Indian call centers. To earn those savings, Cohen and other experts in the offshore call center business say, you need to steer clear of a number of risks:

A Kathie Lee moment

What could be worse than having your company associated with a sweatshop? How about a connection with a sweatshop where the workers are talking to your customers all day long? Experts on Indian call centers say that it’s important to protect yourself against this publicity gaffe by making sure your facilities look good. The most reputable service bureaus in India reportedly spend a fair amount of money to develop top-of-the-line office space.

“The places in India that are coming up are really beautiful, actually — they’re better than 99% of the call centers in this country,” says Satwant Singh Khalsa, vice president of sales at First Ring, a service bureau that has a 225-seat center in Bangalore. “A lot of the places here are abandoned A&Ps or something like that, but in India they’re all brand new and most of them are kind of ergonomic and spanking clean.”

Cohen is also bullish on Indian call centers. There are some dives, he says, but the good ones are very nice. “You go to those Indian call centers, they are first class. The people are first class, the set-ups, they look like you’re going into a Fortune 500 company. Everything is handmade, but not handmade cheap, handmade nice, because the labor costs are cheap. It’s all custom furniture, it’s fabulous.”

Friends for life

The good news is that thanks to high unemployment, your new Indian employees are yours forever. The bad news is that they’re yours forever. It may be hard for people to get hired in India, but as a result of the country’s socialist legacy, it’s also hard to get fired. Companies accustomed to ramping up seasonally may have a hard time adapting, Cohen says. Employees’ needs may be greater too. For female employees, for example, cultural proscriptions against going out alone at night often need to be worked around by providing transportation or dormitories.

Paper tiger

The British may have left nearly 60 years ago, but their bureaucratic legacy is alive and well. Some experts estimate that it can take up to four times as long to set up a facility in India as in the U.S. Shapiro estimates that building a call center takes about six to nine months in the U.S., probably a year and a half in Europe, and at least two years in India, between working through the bureaucracy and installing the necessary infrastructure.

Even when you’re finished with city hall, you’re not finished. The fondness for red tape does not end with the government — Indian businesses reputedly love it too. “When we deal with organizations in India, we have agreements for everything,” says Rick Diamond, CEO of ACI Telecentrics. “Normally, between two American companies you do one agreement. With Indian companies, it’s not unusual for me to have half a dozen different agreements.”

High wire

Some consultants say that the difference between call centers in the U.S. and those in India is that in the U.S., the variable costs are high and the fixed costs are low, whereas in India, the variable costs are low but the fixed costs are high. Things that can be taken for granted here, such as reliable electricity and telephone connections, are often hard to come by. Backup generators and redundant fiber optic or satellite telephone connections are essential, experts say. But Suresh Gupta, lead partner for PriceWaterhouseCoopers, says that he expects some of the telecommunications problems will become less serious after the Indian telecommunications system is privatized this spring.

Faking it

Using a service bureau may mitigate some of these risks, but not all Indian call centers are created equal. The industry is so new to the subcontinent that a key question to ask before hiring out is whether the firm has had any previous clients. “You want to find out who they’ve done it for, unless you’re interested in being a guinea pig,” says First Ring’s Khalsa, whose company serves several Fortune 500 clients. Khalsa advises making sure that the bureau has people on staff who have call center experience and are well-versed in both Indian and U.S. cultures.

Some of this inexperience can translate to such questionable practices as agents trying to masquerade as Americans. A September 2001 Datamonitor study mentioned one company that claimed to train its agents to speak with various regional U.S. accents. “If a customer calls from Atlanta, the agent will affect a Southern accent and if a customer calls from New York City, the agent he or she deals with will sound as if he or she were born and raised in the Bronx,” the report says.

Dotcomedy

Although between 150 and 200 companies say they run call centers in India, Gupta says, he knows of only six he could recommend. Not surprisingly, in view of the scale of the opportunity, the young Indian call center industry now suffers from $100 million in excess capacity. As a result, most experts expect a sharp wave of consolidation in the near future. Gupta says the situation reminds him of the late 1980s in the U.S., when a lot of people started call centers hoping to make a quick buck and get out. Khalsa suggests asking many questions about a prospective partner’s finances, to ensure that you don’t end up funding someone who’s not going to be there tomorrow.

Politically incorrect

India’s political infrastructure may leave something to be desired as well. Cohen says that his company decided against setting up shop in the Philippines because India’s perennial tensions with Pakistan seemed like a more predictable risk than Filipino unrest. “It’s just been going on for so long, there’s a stability to the instability,” Cohen explains.

But Cohen’s partner, Diamond, says companies shouldn’t overlook another kind of political risk in India. Doing business can be “extremely tough when you’re not connected,” he says. “And when I say connected, I mean that in the way connected meant in Chicago in the 1930s.”

Another snag, Diamond explains, is that “people will get hit up for taxes or fines or license and permit needs that just come out of the blue. All of a sudden there’s this regulation and you can be pretty damn sure it was only passed to apply to you. Their state governments, and even the national one to a certain degree, act more like a city council in the U.S. in terms of their flexibility in just passing things with very, very narrow application.”

Of course, you could sue — but Diamond says the average suit can take 15 years to come to trial. To avoid problems, ACI set up revenue-sharing agreements with existing call centers instead of making equity investments. Also, Diamond gets a little help from his friends: He says he has four former classmates who are now well-known figures in Indian business, and using their names has discouraged entrepreneurial bureaucrats who might otherwise be tempted to engage in a little creative destruction.

Codependency

Most experts suggest using an offshore call center as one of a number of facilities. There are probably not too many things that GE Capital and Amazon.com see eye to eye on, but one is diversifying their customer service support. Both companies run customer service operations all over the world. GE Capital’s 12,000 operators in Gurgan and Hyderabad are only about one-fifth of its entire call center workforce; the rest work in 18 other call centers, the majority in the U.S. Amazon.com operates customer service centers in Washington and West Virginia, and works with service bureaus in Oregon, Northern Ireland, and India. Amazon.com spokesperson Patty Smith says that this diversity can come in handy if workers at one facility can’t get to work. Ironically enough, anti-globalization protestors couldn’t close Amazon when they shut down Seattle two years ago protesting the World Trade Organization talks — the company just rerouted its e-mail inquiries to other centers, according to Smith.

GIGO

As programmers like to say, garbage in, garbage out. Ultimately, without clear and consistent training across all your call centers, customer service is likely to be compromised. “If you have crappy call center activity in the United States, somehow putting it in India is not going to improve it,” says GE’s Oliver. “The key thing is you have to approach it with rigor, you have to be dedicated, and you have to make sure it operates properly, and then it doesn’t matter where the hell you do it.”

Bennett Voyles is a business writer based in New York City. He can be reached by e-mail at benvoyles@yahoo.com.