Indian Call Centres are a major threat to a thriving UK industry sector according to the findings of a new report published this month.

The first independent study of the Indian call centre industry shows that businesses from the subcontinent are set to grab market share from the UK's 170 outsourced call centre operators. Indian operators, the report claims, are well-equipped and positioned to deliver a potentially better service to British callers and 30-40% costs savings for UK business.

Indian Telemarketers paid only tenth of a UK wage.

A vast resource of highly educated, IT-literate labour, receiving wages that are 10-15% of their European counterparts, combined with world-class facilities and experienced management, means India is poised to challenge many of Britain's 3,500 call centres. The report cites that a British financial services business is already using an Indian call centre. In the past year alone, 17 Indian call centre operators have set up in the UK to solicit contracts.

The Indian call centre industry is tipped to grow from $250m to $17bn by 2008. Already some US corporate giants, including American Express and GE Capital, are taking advantage of the cost benefits of running call centres from India. Around $200 million is currently being invested in call centres around India and this will provide 33,000 agent positions by 2002. India's call centre industry is located around five cities: Delhi, Bangalore, Mumbai (Bombay), Chennai (Madras) and Hyderabad. Big call centre operators include CustomerAsset, Spectraminds, Global Telesystems and Air Infotech.

Gold Rush mentality dampens prospects

However, business is not going to flood from the UK to India in the short term. Despite the potential cost savings, British companies remain conservative about outsourcing customer support and sales operations to distant locations like India. They are also concerned about a backlash from consumers in terms of public relations and corporate image issues.

Apart from issues about operator accents, language and tone, customers may feel devalued if businesses are perceived to be "cutting corners" in serving them. Taking advantage of this cheap labour source may be considered exploitative - reminiscent of the 'sweatshop' labour of other industries.

Many UK businesses also have grave concerns about the infrastructure requirements and the long-term stability of some Indian operations. Currently in India, there is a 'gold-rush' mentality about investing in call centres and all have highly optimistic growth targets. The report estimates capacity in India rising by 97% in the next few months (from 7,500 to 14,750 seats) and then overall by 245% from the current 14,750 agent seats (building) capacity to 33,000 agent seats by the end of 2002. British companies will want to take their time to sort the serious players from the merely opportunistic.

Politicians call the tune

Potential British customers should also be wary about the political situation in India. Although the present government is pursuing a policy of encouraging foreign investment, opposition to this from factions within the ruling coalition means that the business environment for overseas companies is not as favourable as it may at first appear. The Indian government's privatisation programme is also proving slow to get off the ground and opposition to state disinvestment - particularly in the Telecoms sector - is generating unrest and union disruption which could prove problematic for investors in India's call centre sector.

Wake up Call for British Business

It is likely that during the coming year, many UK businesses will "dip their toes in the Indian call centre water", testing their capability with small-scale projects. For an 18-month breakeven requirement (against assumed off-shore management on-costs) only a 14-seat operation would be needed. A 50-seat facility would have a payback period of only 3 months. Quality is not issue either, with over 50% of Indian operations being awarded, or seeking, accreditation with ISO and other Standards.

Low-end, high volume work seems to the type destined for Indian out-sourcing. Routine (e.g, directory) enquiries and data verification are two examples. Other repetitive enquiries are already under threat from automated call handling technology. This leaves only high-value CRM (Customer Relationship Management) work. But, high-value projects come with higher expectations and greater risks.

Mike Havard, is chairman of Outsourcing Insight - authors of the report - and head of the consortium that has just returned from the India fact-finding mission. While acknowledging the seriousness of this 'Wake Up Call', he is aware of disadvantages too. He claims, "If UK call centres are to defend themselves against a loss of business and jobs to India, they must act now. They must accept the clear and present danger presented by India, invest more in their quality processes and staff and add more value to their offerings so that they don't lose business on the basis of cost alone."

'A Call for India' - The report by Outsourcing Insight, is available now. Price: £2,200 plus Vat. Contact: Tel 01932 268 100 fax 01932 268 109. Outsourcing Insight is Europe's only management consulting practice specialising in the call centre outsourcing industry.

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