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Article : Debunking Commonly-Held Myths about Outsourcing Contact Centers to India

The findings of this report support the following:

  • U.S.-based companies should develop a global sourcing strategy. Companies should develop and maintain an ongoing global sourcing strategy to take advantage of low-cost educated labor other countries, especially India. A global sourcing strategy can be effective for companies with sales of less than $200 million.

  • CEOs should be able to describe their global sourcing strategy to the Board of Directors succinctly and do so proactively. For most companies, the initial benefits of a global sourcing strategy can be realized by starting with outsourcing existing call center operations.


Bryan Mekechuk
Founding Partner
 Pacific Crest Consul. Grp

  • Offshore Business Process Outsourcing (BPO) is a Mega-Trend that Will Change Business Worldwide. This is happening and it isn't going to stop. The enabling technologies are robust and the cost of these technologies has fallen sufficiently to open up vast pools of low-cost educated labor in developing countries. The cost savings that may be realized are significant so companies are now using global resources to perform their business processes, unconstrained by geographic location.

  • Offshore BPO is a Mega-Trend that Will Change Business Worldwide. This is happening and it isn't going to stop. The enabling technologies are robust and the cost of these technologies has fallen sufficiently to open up vast pools of low-cost educated labor in developing countries. The cost savings that may be realized are significant so companies are now using global resources to perform their business processes, unconstrained by geographic location.

  • Geopolitical Stability Will Increase as More U.S. Businesses Rely on India-Based Resources to Function. General Electric has moved important business processes to India of such magnitude that any conflict between the U.S. and India could adversely affect General Electric's ability to operate. The result of this movement to India increases geopolitical stability as General Electric will put pressure on this and subsequent U.S. administrations to avoid conflict with India. The implication is that other companies can be confident that the geopolitical risk of India is low.

As set out in this research, the acceptance and growth of BPO will increase for the following reasons:

  • BPO Improves Operations as One Company's Back Office Becomes Another Company's Front Office. For most companies, back office operations are just that – back office operations. Thus, these areas do not receive the same attention and investment as front office and other customer-facing processes. On the other hand, these operations are the front office of a BPO service provider. This key difference results in superior back office operations when outsourced.

  • BPO in India Can Scale. The only constraint that may prevent the BPO industry from scaling in India is the country's poor infrastructure. Although unstable sources of electricity can be compensated through local power generation, the lack of adequate public transportation and weak road network will ultimately constrain the BPO industry. As more work is moved to India the existing fleets of vehicles to transport employees will contribute additional traffic that will make a bad situation even worse.

This report shows that the market dynamics caused by the opportunities to utilize low-cost educated labor in India will include:

  • U.S.-Based Call Center Outsourcers Will Continue to Locate Operations in India. Convergys and others have built facilities in India and are moving call volumes from the U.S. to these lower cost locations. As these firms have existing business, their seat utilization in India will be higher than India-based Call Center Outsourcers.

  • Currently, Voice Comprises the Majority of Outsourced Work to U.S.-Based Companies Although Significant Potential Exists for Non-Voice Processes, Especially Finance and Accounting Processes. Most U.S.-based companies are familiar with outsourcing their call center work and, increasingly, their information technology maintenance, support and development. There is significant potential to outsource other processes to offshore providers, including finance and accounting processes. Service providers will continue to advance their finance and accounting services, which U.S.-based companies will continue to adopt.

  • The Cost Benchmark for Call Center Operations is India, Not the U.S. The value propositions put forth by most technology venders use the cost of labor and overall cost structure of call centers that are located in the U.S. With more companies implementing global sourcing strategies, the relevant cost benchmarks are now those relating to lndia-based call centers. To maintain their credibility, technology vendors will be changing their value propositions to reflect this.

There are several tiers of service providers offering BPO services. Although some of the newer global companies have BPO services, due diligence is required to differentiate facts and true capabilities from marketing claims.

When assessing contact centers in India, the following should be considered:

  • Top Tier Outsourcing Firms Offering Call Center Services Provide High-Quality Personnel With Neutral Accents That Callers Accept. The top tier firms all have effective accent neutralization training courses for their agents and these service providers monitor their performance effectively. This training and monitoring results in agents having acceptable conversations with callers. We believe that the lack of accent neutralization training and subsequent monitoring may be a risk when working with lower-tier firms.

  • Turnover Helps to Maintain a Low Cost Structure. Although many people believe that high turnover in contact centers indicates a problem, the real problem with high turnover in contact centers is when it is not managed appropriately and it increases the overall cost of operations. Turnover helps to maintain a low cost structure in contact centers.

  • Service Provider Claims of Third Party Certification. A common strategy for India-based companies is to obtain third party certification of their capabilities. We noted that some service providers will claim that they comply with such third party standards although these companies have not been certified by, or even registered with, those third parties. Buyers should be skeptical of any service provider making such unsubstantiated claims.

  • Contracting Entity and Service Delivery Relationship. For U.S.-based companies (clients) contracting for service delivery capabilities in India, the corporate structure between the contracting entity and the India-based service delivery resources is important. We believe that a structure with a U.S.-domiciled parent company having a wholly-owned subsidiary in India provides the most protection to the U.S. client.

When making the decision to outsource and move operations offshore, executives should be prepared for the following:

  • Know and Understand the Total Cost of Outsourcing or Moving Operations Offshore. Executives should know the total cost of the outsourcing relationship, including the additional management effort required to maintain relationships with the service provider(s). Expectations should be set with all stakeholders regarding the costs, effort and timeline required to use offshore service delivery capabilities. Executives should undertake a comprehensive analysis of the make or buy decision and know the total cost of outsourcing.

  • Anticipate Questions and Concerns from the Board of Directors Regarding Offshore Operations (In-House or Outsourced). With the recent changes regarding corporate governance, the Board of Directors may ask additional questions and look for validation of the decision to go offshore or use outsourcing firms. Independent board members may challenge advice obtained from the outsourcing firms themselves relating to the alternatives considered, the costs and benefits of outsourcing processes, and the risks of doing so. Thus, executives should anticipate these questions and have, or be able to obtain, independent advice to support their decisions.

The decision to outsource business processes offshore is a controversial topic that increasingly surfaces in boardrooms and among nervous employees, as U.S. companies seek ways to manage costs. But the discussions surrounding this issue are often clouded by misconceptions and emotion. In an industry report, Zelos Group debunks several myths concerning BPO, and says that all companies should consider offshore outsourcing, especially those with contact centers.

"Offshore BPO is a mega-trend that will change business worldwide," observed Bryan Mekechuk, who reviewed 18 contact centers, in five cities in India. "The enabling technologies are robust and the cost has fallen sufficiently to open up vast pools of low-cost, educated labor in developing countries. The cost savings that may be realized are significant and compelling, so companies are now using global resources to perform their business processes, unconstrained by geographic location."

Despite the rapid growth of outsourced contact centers in India and the potential to increase profits by replacing expensive, domestic contact center operations, current negative publicity in the U.S. about sending American jobs offshore and a host of commonly-held myths frequently interferes with a company's ability to make informed decisions about offshore outsourcing. This report, written for executives considering using offshore resources, is based on primary research, and site visits and reviews by Bryan Mekechuk, an international expert in business processes and contact centers.

Myth: Only large companies can outsource. Business Process Outsourcing: Focus on India examines cost comparisons between onshore and offshore outsourcing, and the report finds that a global sourcing strategy can be effective for companies with sales of less than $200 million.

Myth: Outsourced staff from India lacks the quality of its domestic counterparts: Indian call center employees all possess quality, college-level educations, were highly motivated to excel at their jobs and Tier I outsourcing firms offer effective accent-neutralization classes. In many cases, an accent is not detectable.

Myth:The geopolitical environment makes India a precarious place to maintain business operations: Perhaps the most surprising assertion Zelos Group makes is that geopolitical stability will increase as more U.S. businesses rely on India-based resources to function.

"Large U.S. companies like General Electric have moved important business processes to India of such magnitude that any friction between the U.S. and India may affect such companies' day-to-day ability to operate," observes Mekechuk. "The result of this movement to India is an increase in geopolitical stability, as these corporations will put pressure on this and subsequent U.S. administrations to avoid tension with India." The implication is that, although the perceived geopolitical risk of India may be high, the actual risk is low."

Executives of companies of all sizes are increasingly being asked to address BPO, but struggle to quantify an accurate cost/benefit analysis. As corporations and public policy mandate higher levels of executive accountability, the accuracy of this type of information has never been more important. Furthermore, the trend will continue to grow. Zelos Group asserts that the relevant cost benchmarks offered for call handling should be those relating to India-based call centers and that value propositions will soon be changed to reflect this shift.

"A global sourcing strategy demonstrates to Wall Street that a company is managing costs, as opposed to merely cutting costs in a particular area," advised Mekechuk. "CEOs should be able to describe their global sourcing strategy to the Board of Directors succinctly and do so proactively. For most companies, the initial benefits of a global sourcing strategy can be realized by starting with outsourcing existing call center operations."


About Bryan Mekechuk
Mr. Mekechuk is a Founding Partner of Pacific Crest Consulting Group where he specializes in helping clients with their customer-facing processes. Bryan has more than 20 years of experience and has spent the past 15 years advising companies in customer service, technical support, finance, marketing, and general management. His domain expertise is in customer-facing and financial processes, and associated outsourcing of such processes. He developed his expertise in customer-facing processes through working on solutions with more than 50 contact centers across 6 industries in 8 countries.

About Zelos Group
Zelos Group is a research and advisory services firm that assists leading technology companies and service providers in the interactive services sector. The company focuses on voice applications, wireless applications, directory assistance and electronic games across multiple platforms, networks and devices. The firm's analysts are frequently sought as industry experts, and often appear in the media and at conferences around the world.

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Published: Tuesday, January 27, 2004

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