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Andi Fadhila Arvin
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Ashwin Raj
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Harold Bautista
Founder & CEO

Article : Good Morning Europe!

Estelle Pillay from Eersterivier spent a year unemployed before finding a job. She joined People2Contact, a Dutch company partnering with local call centre outsourcer Absolutvalu. It opened in Cape Town's northern suburbs last month. Estelle had worked in call centres before, but these people were talking a different language.

"It was a challenge at the beginning. But I stuck at it – and I realized that the customer is the same. Now I know I can do whatever I put my mind to".

Estelle, 30, now spends her days talking to customers - in Dutch. The company is putting new recruits - all Afrikaans speakers - through 3 months language training.

Today, the team handles customer service queries for Airmiles in The Netherlands – and performs to the same efficiency level as the Dutch call centre it is supplementing.

Luke Mills
Executive Director

Estelle's job is one of 2 million that management consultancy Deloitte predicts could migrate offshore over the next five years. Deloitte estimates that some $356 billion in financial services expenses will be transferred to cheaper countries. That's more than twice SA's GDP.

South Africa's outsourcing industry is still immature, but People2Contact is one of a number of investors who have identified the Cape as a potential winner in the race for the offshore outsourcing dollar. India has set the pace, attracting major investors and establishing world-class service providers in call centre management, IT and business process outsourcing (BPO). Explosive growth in India, and an increase in competition from other countries, has led some to question whether Government's focus on this industry is justified. Where, ask sceptics, with some justification, is the GE or Amex that will kick start our industry? Is the race over?

Not yet. Outsourcers and the multinationals they service haven't considered anywhere but India because they haven't had to. Now, global commercial realpolitik is forcing a rethink. A multinational representative in SA recently explained the issue: "We've got 1,000 people in India. It doesn't make any sense for us to put more people there".

India may well end up with 60% or more of the global BPO outsourcing market – and is particularly cost effective in commoditised IT-intensive processing. But India's very success has brought with it an uncomfortable concentration of exposure – making diversification inevitable. And the huge scale of some Indian operations (up to 5,000 seat centres) can be off-putting to SMEs wanting to place 50-100 seats overseas.

"Investors tend to weigh up three basic factors when choosing an outsource destination – cost, capability and risk" says Jason Drew, Chairman of British company the Dialogue Group, which considered a number of alternative locations. "SA fares better than people think."

Costs are competitive. You can buy a fully costed call centre seat in Cape Town for around $14 per hour – versus $10 in India and over $25 in the developed world. With little pressure on salaries and a telecommunications market that is starting to deregulate, SA prices are likely to fall.

Value to the customer, though, is a combination of price and productivity, and this is where capability comes in. There are aspects of the SA skills set that give service providers an edge. SA agents work in call centres for an average of three years, and attrition rates are very low – in the region of 5%-10% - resulting in high productivity.

More importantly, customer service is not something that can be easily commoditised. Recent investors including Budget Insurance have remarked on SA employees' fundamentally good aptitudes for international contact centre work – enthusiasm, willingness to learn, a good accent and customer touch.

Philip Witheridge, CEO of the Grove Group, a consultancy currently in Cape Town initially placing 50 outbound call centre seats for UK clients, puts it this way. "It's a different kind of proposition. SA is a premium service at a standard price. Agents here have something that can't be taught – the ability to engage with the customer in a positive way."

Customer service is such a key aspect of a client's brand that price is not the only, or even the primary consideration. Service and delivery matter more. Dialogue Group now handles all renewal business for the Admiral Group, a Cardiff-based insurer. Customer feedback has been so good that Admiral is now set to expand its commitment to Dialogue in Cape Town to 150 seats. Last month, Admiral's employee of the month was Laura Ann George - a 34 year old mother of two from Muizenberg.

SA's skills are not limited to call centres. Computer Sciences Corp. (CSC) is a global outsourcer that operates processing centres for insurance clients. The presence of SA's three largest insurers and competitively-priced skills drew them to Cape Town, where they currently employ 130 people.

Bev Cunningham, CSC HR Manager: "One of the biggest selling points for the SA operation has been the productivity. We are hitting and even surpassing US standards. We look for matriculants with 4-6 years experience and at any time we have at least 50 people waiting in the wings. The labour pool here is deep and the people hard-working."

The capabilities are certainly there. What of the risk? Investors are more interested in evidence of companies' ability to manage offshore transition than in SA's much-vaunted economic and political stability (though both are important). Here, the relative immaturity of SA's outsourcing companies has been a negative factor. But this too is starting to change. Recent success stories involving high profile international clients have proved that the SA model works. This is changing buyer perceptions. Multinational interest has probably never been as high.

The opportunity for SA to be a global player is still there – particularly in customer-focused industries like travel and financial services. In the European market, time zones, availability of European languages and cultural similarities give SA a world-beating proposition. Two major European airlines are already established in Cape Town, but partnerships with Indian or US outsourcers (who have hitherto concentrated on the US market) could really unlock the market.

Government is doing a lot of the right things, but there is no room for complacency – particularly in relation to supply side development. Best practice management and training needs to be encouraged, with a focus on the skills international companies need. Customer service skills need to be taught in schools. More pro-growth telecoms policy is required. Professional bodies need to ensure their qualifications comply with international standards. The SA financial sector – particularly the venture capital industry – needs to play a greater role.

But there should be no doubt that we are now reaching the growth phase of what could be a very significant J-curve. In Cape Town it could mean more than 1,000 new jobs this year. The call centre industry in the UK created more than half a million jobs – many of them in depressed urban areas.

Now these jobs are coming to Cape Town and changing lives. Just ask Esther Pillay: "Call centres is the way to go - the future for SA. I want to create an opportunity so that I can live my life now – not when I'm 50 or 60. I feel like I can do a lot of things now. I didn't feel like that before."

About Luke Mills:
Luke Mills started his career as an investment banking analyst at S.G. Warburg in London (now UBS). He has subsequently worked as an entrepreneur and/or in management positions in a range of small businesses, including technology, publishing, property, and investor relations companies both in the UK and in South Africa. He brings 10 years of investment strategy and operational experience, as well as a passion for creating jobs, to CallingtheCape.

About CallingtheCape:
CallingtheCape was founded in 2001 to promote and develop the IT-enabled services industry in Cape Town, with a strong initial focus on call centres. It operates both as a specialist investment promotion agency for business process outsourcing (including call centres) and as a regional trade association and networking body for the industry. CallingtheCape's mission is to position Cape Town as a global services outsourcing hub.

Today's Tip of the Day - Speech Opportunities - What To Look For?

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Published: Friday, August 20, 2004

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