December 26, 2000, 9:55 AM

Cyber Pass

(Page 2 of 3)

“It isn’t so much that demand is outstripping supply as it as that supply is able to command a higher price,” says Drew Kraus, a senior analyst with DataQuest. “You can find agents, you’ll just have to pay more for them.”

India offers another picture. Though illiteracy countrywide is high, there’s an enormous emphasis on education among the upper classes with culturally embedded inclination towards mathematics, which has spilled over into science and technology. The combination has helped turn India into a major developer and exporter of software in recent years. Industry-watchers say lower labor costs and an abundance of English-speaking workers make it a natural for outsourced customer support services, including those that are web-driven, in the U.S. market. “The labor costs typically amount to two thirds of all the cost of running a customer contact center,” adds Kraus. “One of the ways for call centers to reduce their costs or to get more quickly to profitability is to go to lower-cost agents. You don’t want to make sacrifices in their educational level, so that makes India a particularly interesting alternative.”

Indians’ education in English begins in nursery school, so work force communications can support English-speaking transactions. There’s an available labor pool, too. According to data from the World Bank, some 38 million Indians who’ve completed secondary education currently are unemployed, as are 27 million Indians with university educations-together, roughly 7% of the country’s population of 978 million. “It’s an educated, English-speaking-population-and you can pay them considerably less than you have to in the U.S.,” says Kraus.

How much less? Reports vary. Tyler, at 60 days into his first contract with an Indian customer contact center to support a single technologically intensive product, says outsourcing to India will cut his cost for email support by 50% or more. This is due to the difference in labor costs, savings he’ll pass on to his client. “It wouldn’t be worth doing to save only 10-15%,” he adds. Others offer a more conservative estimate. “The percentage by which customer contact center costs come down in India is a factor of a number of things,” says D.K. Sareen, executive director of India’s Electronics and Computer Export Promotions Council. “While labor costs are lower, energy and telecom costs in India are relatively higher. One could easily get call center costs down for a 25-40% savings.”

Sophisticated gadgets

Though offshore outsourcing of call center support has been mostly limited to technology products, industry-watchers point out that this category is growing as consumer gadgets get more sophisticated. Bawa Singh, vice president of quality and operations planning at Stream International, says more consumer products already require the kind of ongoing customer support usually reserved for computer purchases. This is one reason the company plans to launch Stream Tracmail from tech-literate India. Whether shoppers want help with product features on selection or have questions post-sale, “Consumers are getting into more and more smart devices,” he says. “Consider cameras and cellular phones that download off the web; there are chips now in everything. These products are becoming more complex from the perspective of making a selection and using them over time. There’s going to be a need for continued support of these products, just like there is with PCs.”

Another reason U.S. outsourcing to India is on the rise is that India is pursuing it aggressively. In August, Sareen brought a 35-member delegation to attend the Incoming Calls Management Institute’s annual meeting in Chicago and to drum up business for India’s fast-growing call center industry. While a handful of Indian customer contact centers already are capable of supporting fully integrated customer service applications including email, live chat, self-help and voice, “20 more are in the pipeline,” he says.

The hourly differential

India is neither the first nor the only country with a burgeoning call center industry to eye the U.S. market. Ireland has in the past decade developed a strong presence in so-called knowledge-based industries, including software developers and suppliers to support web-enabled businesses, such as e-enabled call centers. In fact, Ireland hosts some 40% of the U.S.-based companies with call center and tech support facilities in Europe. Labor costs across the board in Ireland are a bargain by U.S. standards; India’s are even less expensive.

And while little research exists directly comparing call center agent costs among countries, a look at labor costs in manufacturing offers some basis for comparison. In 1997, hourly compensation costs for workers in manufacturing-including pay and benefits-averaged $18.24 in the U.S. and $13.57 in Ireland. And in India?

“Less than $1,” says Catherine Mann, a policy analyst and researcher for the Washington, D.C.-based Institute for International Economics. Attracted by lower labor costs, some U.S. call center companies are exploring relationships with companies in the English-speaking Philippines and even Jamaica.

Customer service vendors scrambling to keep up with demand from e-retail and other web-enabled industry sectors see a solution in India’s lower labor costs and pool of educated workers. But their clients-retailers or manufacturers who guard their brands like gold-may be slower to embrace an offshore outsource solution that removes customer interface even further from home base.

Partly sunny in New Delhi

Mindful of these concerns, some call center companies venturing into India on behalf of clients are doing so cautiously. With India supporting only one product for his clients so far, “We’ll have to see as we broaden the product offerings whether they can mange a broader array of products having different marketing requirements and service offerings,” Tyler says. Some industry-watchers also aren’t convinced that live agent voice exchanges over the Internet-already on the radar screen at some customer support service providers-would be the best use of Indian agents’ technical knowledge.

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