Monday, September 9, 2002		Guest Speak

Call centres face problems
Asheesh Gupta

Asheesh Gupta, Business Head, Hero Mindmine

THE spotlight has shifted from the IT sector as a whole to IT-enabled services as one of the highest growth segments in the country. Within this segment, call centres can bask in glory, being one the largest contributors to this growth.

Yet, this might also be an opportune moment for our industry to introspect a bit. Are we heading towards haphazard growth determined solely by market dynamics or are we applying foresight to secure unfettered growth based on a foundation of planning.

A hard look at the developments in the sector does indicate that the fundamental business economics of our growth model is skewed and requires urgent correction.

For certain, the growth potential of the IT enabled services is undisputable. Global opportunities for the worldwide IT enabled services are projected to reach $611.4 billion by 2005, and according to a recent KPMG study, India has the potential to address 38 per cent of this market.

Call centre outsourcing services represented the highest growing segment with revenues of Rs 8.5 billion on account of a 112.5 per cent growth during this period.

The fallout of this growth is an exponential increase in its demand for a skilled workforce. As against a mere 14,000 employed in 1997-98, the call centre workforce has grown to over one lakh this year and is expected to leap to more than 4 lakh by 2004-05.

The economic rationale for the growth being witnessed in the industry has been its competitive advantage as an enabler of lower costs.

The industry is faced with a new set of problems as it enters its phase of consolidation. There is growing attrition, and a large drop in the quality of workforce. The industry is resorting to desperate measures like 24-hour walk ins, lowering entry level benchmarks, cradle snatching and poaching.

The scenario ahead looks worse. For the 50,000 new jobs estimated to be created by the industry in 2002 – adding a realistic 10,000 to account for attrition – as many as 1.7 million candidates need to be pre-screened. This is 28 times the number graduating from Delhi and Mumbai!

Until now, call centres have been sourcing graduates from top colleges, attracting them with the excitement of a new industry offering quick placement possibilities.

This has led to a mismatch in aspirations and employee profiles of the industry. With several service providers resorting to in-house training, this cost of ownership of training needs to be built into cost of business. Increasing attrition therefore directly implies increasing numbers to be trained.

In addition, the increasing war for talent in the industry is pushing up the average cost per employee.

It has been estimated that the average salary of voice based customer service agents has gone up by 50 per cent in just two years from an average annual income of around Rs 97 k in 2000 to an average of Rs 145 k in 2002.

This does not take into account some more camouflaged increases. A closer look reveals that beyond the 50 per cent increase in salaries, assuming longevity of one year, additional hiring costs add Rs 9 k per employee, training costs Rs 9 k and efficiency loss another Rs 22 k. As such the average cost to company per employee adds up to a real estimate of Rs 185 k – nearly double the original cost.

To make matters worse, there is a parallel development of increasing competition both international and domestic, leading to lower realisation. The average realisation has dropped from $18-20 per hours to $ 10-14 per hour.

With both ends closing in, there is a squeeze on profits and cost advantages, challenging the very business economics on which the outsourcing model is based.

The need of the hour is a solution encompassing the three dimensions to the problem. It needs a fine-tuning of the models of sourcing and training. It calls for a paradigm shift from ‘lets go where the infrastructure is, to lets go where the people are.’

Get the right set of people involves a matching of not just skills and aptitude, but also the aspirations. Under the present sourcing model, the aspiration level of the target segment is too high. Moving out of the metros and top colleges to smaller towns, will achieve a better match of profile and lower attrition.

The second dimension to the solution calls for a ‘farming’ approach to sourcing rather than the present ‘hunting’ model. We need to move from highly skilled sure hires to trainable resources with the right aptitude and attitude.

And finally, the key to distributing the growing costs is to ensure that rather than the companies bearing the developmental costs, the candidate pays for training. Simply stated, the industry needs to hire trained candidates.