Copyright (c) 2001 Thomson Financial, Inc. All Rights Reserved.
Sixty million dollars of annual savings is what attracted Conseco
Corp. to it, while Citigroup likes the improved quality of service
the outsourcing of call center services to India, a practice that
has begun to gain favor among the financial services set. Though
General Electric pioneered the concept, financial firms have been
quick to recognize the potential for this important customer-facing
function. Not only is labor cheap in India, but workers there are
technologically adept, multilingual, and very well educated.
an $8 billion-asset insurance group in Carmel, Ind., apparently
felt so strongly about the advantages that in August it acquired
exlService, an Oakland, Calif., firm founded in 1999 to establish
outsourcing operations in India.
Conseco subsidiary provides inbound and outbound voice support services,
transaction processing, and e-mail management out of two centers
in Noida, a suburb of New Delhi. The first center opened in October
2000, and a third will open in February in Bombay, bringing exlService's
employee count to 1,500.
Talwar, its chief executive officer, said its clients, which include
Conseco and other companies, mostly in financial services, save
at least $25,000 a year per full-time employee by outsourcing to
very low end, if you move 1,000 jobs, that's $25 million," he said.
"It takes a lot of revenue to make that."
estimates it will save $60 million annually by shifting customer
service operations to exlService. Because turnover in the company's
North American call center and back-office fulfillment operations
has averaged about 30%, Conseco is not expecting any major layoffs.
Electronic Financial Services has cut its call center labor costs
by half since it began outsourcing its call center operations to
Santa Monica, Calif.-based MphasiS, a software integration company
that operates two call centers in India.
though higher telecommunications expenses and an increase in call
volume eat up the savings, the Citigroup Inc. unit benefits from
a more skilled work force, said Rick McKinney, the unit's senior
director of operations.
what we've learned is it's a very effective way to leverage a pool
of talent on the other side of the world and improve the overall
service we've been able to give," he said. "It allows us to serve
the cardholder better for about the same money."
division, which provides account hosting, processing, and support
for companies and government agencies offering debit card products,
decided to outsource to MphasiS in mid-1999, when call center volume
began skyrocketing, and had made nearly a full transition by the
end of last year, Mr. McKinney said.
Arthur Flew, the president and chief executive
officer of MphasiS BPO, the MphasiS division that runs the India
facilities, pointed out that call center jobs in the United States
are at the low end of the employment spectrum, typically attracting
part-timers such as "stay-at-home moms or retired people."
he said, call center positions are highly coveted in a Third World
country like India. The 500 workers MphasiS employs at its call
centers in Bangalore and in Pune are university graduates. The two
centers have attrition rates of 12%, which is considered low in
call center circles.
there's a cost advantage -- but more importantly, there's a quality
advantage," Mr. Flew said. "If you look at America today, our customer
service operations are not doing a good job. To improve on that
customer service, to improve customer satisfaction and get better
customer loyalty, that's got to be worth more than the cost savings."
General Electric Co. is widely credited for starting
the trend of outsourcing to India. The company opened a call center
outside New Delhi in 1998, and another in Hyderabad last year. But
offshore call centers are nothing new to GE, which opened its first
in Leeds, U.K., more than a decade ago and now has call centers
in about 15 countries and regions, including Japan, Ireland, Austria,
Oliver, a spokesman for GE Capital, a wholly owned subsidiary of
General Electric Co., said that regions such as the Bergenland,
an economically challenged area in southern Austria, offer the ideal
mix of skilled, well-educated employees who have superior language
skills, sometimes speaking three or four languages.
that happen in the United States?," Mr. Oliver asked."Absolutely.
Could it be done as efficiently and sensibly as it's done in Austria?
the talent pool with the economic situation in a place like Bergenland,
Mr. Oliver said, "and you've got a terrific business opportunity.
The people in that region get great jobs, it works for the government
because people are now paying taxes and helping the economy, and
it works for us because it's an efficient way to run our business."
these other benefits, the cost factor clearly looms large. A recent
Jupiter Media Metrix report found that labor costs account for 80%
of call centers' budgets and that attrition among call center staff
averages 40% annually in the United States. It said the cost of
hiring each new customer service representative totaled about $7,000.
Turnover of call center employees costs a typical 150-seat call
center more than $500,000 annually, the report found, and hurts
employee morale and customer perception.
the report found that call centers handling 300,000 inbound customer
contacts monthly can save $2 million annually, or 15%, by outsourcing
their customer support operations. "The battle to retain employees
and contain staffing costs should impel businesses to consider outsourcing,"
the report recommends.
interview, David Daniels, an analyst at the New York firm and co-author
of the report, said cost is the main driver for companies to outsource
call center operations to other countries.
has been a popular choice for at least a decade, he said, as has
the New Brunswick area of Canada, where a downturn in the natural
resources sector prompted the Canadian government to provide subsidies
for foreign companies that set up operations in the region. "Those
have been typical places for companies to outsource, because of
the language issue, but India is still more cost-effective," he
outsourcing to India have found a way around language and cultural
barriers by locating in parts of the country that are more accent-neutral.MphasiS
hired a voice coach to teach new employees how to drop their accents
and speak in American vernacular. Workers are trained in how to
recognize regional accents, and told to keep up on American news
and culture to be able to converse with customers.
said the practice makes customers feel reassured."American customers
are largely used to calling the heartland here in the States," he
said. "It gives the customers some comfort that the person they're
speaking to really understands their issue."
not ask employees to use pseudonyms, but Mr. McKinney said Citicorp's
Indian employees use Anglo names simply for the sake of clarity
and efficiency. "If a customer asks to have the representative's
name and it's foreign to them in terms of the number of syllables
or the spelling, it takes a lot longer to complete that exchange
of information," he said.
McKinney said Citicorp makes no secret of the practice and has had
no complaints about it. "We've had several of our state customers
monitor calls and they felt the level of service was very good,
and they actually had more difficulty understanding the callers
than they did the representatives," he said.
to India gained a foothold about a decade ago with software development,
but MphasiS president Jeroen Tas, who started the firm in 1998 along
with fellow ex-Citibank employee Jerry Rao, said the "real boom"
occurred as North American companies started noticing the quality
of Y2K work done in India.
found out they could get the same quality, and in many cases better
quality, for a fraction of the cost in India. That sort of took
away a lot of skeptical remarks."
of call center operations to India is creating so much demand for
employees that staffing is becoming a challenge. "It's becoming
more competitive," said GE's Mr. Oliver. "As more call center operations
go into India, labor has a value."
major issue for foreign companies, Mr. Daniels said, is the paucity
of employees with the experience required to run a call center and
manage hundreds of workers under one roof. The situation will likely
change over the next couple of years, he said, as American companies
start to bring managers to India and local employees gain some managerial
on India's work force may abate somewhat, as the increasing mobility
made possible by technology prompts firms to seek out other parts
of the world with similar opportunity. MphasiS, looking to replicate
its work in India, is considering setting up call centers in Mexico
places will definitely become important," Mr. Tas said. "Technology
is enabling us to come up with completely different models that
are no longer location-dependent."
said that though the September terrorist attacks caused many companies
to initially delay strategic decisions, he believes there will be
long-term benefits for outsourcing companies, as security concerns
prompt financial institutions to further decentralize their operations.
in Afghanistan has raised fears about instability in the region,
but exlService's Mr. Talwar said the company has not been hurt.
On the contrary, he said, exlService has received more inquiries
and visits from potential U.S. customers than it did before Sept.
11 as American companies look for ways to cut costs. When the economy
swings to the other extreme, labor shortages prompt companies to
consider outsourcing to India, creating opportunities on both ends
of the spectrum, he said.
some other outsourcing companies, exlService has no plans to set
up shop outside of India. "I think the value proposition here is
so strong that at the moment we're not looking at anywhere else,"
Mr. Talwar said.