Wants Call Center Capacity
Chalré Recruitment Outsourcing
A couple of months ago, IBM announced that it was
purchasing a 9,000-person call center named Daksh with
operations in India and the Philippines. The acquisition is
interesting for two reasons. First, IBM previously had no
significant call center capacity and with this one purchase
has become a major player in the booming offshore industry.
Second, the price IBM paid was considered by most people to be
irrationally exuberant. According to investment banking firm
Avendus, the price was roughly 15 times last year's earnings
(or three times annual revenues). Clearly, IBM felt that
owning (rather than just leasing) call center capacity was an
absolute necessity for its long-term business strategy.
Earlier in the year, Accenture hired a senior call center
executive away from the contact center company ICT Group. When
I spoke to this executive about his new job, he said he was
hired to be "responsible for the world's single largest call
center offshore initiative," which involves 6,000 call center
seats. Apparently, Accenture is moving into the call center
business in a big way as well.
Traveling in the opposite direction, the large call centers
are moving into the IT services business, although in a
somewhat less grandiose manner. Sykes is a worldwide contact
center organization with many service lines including managing
tech support for clients like Microsoft and Intel. It has done
such good IT support work that it has moved into full-blown IT
outsourcing. In the Philippines, Sykes is hiring software
developers by the hundreds to do software programming work for
its blue-chip clients.
Convergys, another large contact center organization, has
hired ICT heavyweights to oversee the company's Information
Management Group. Its objective is to focus on developing the
company's "higher-value service offerings" in the IT and
business process outsourcing (BPO) spheres.
Meeting in the Middle
Another area of budding togetherness for IT and contact
center services, BPO is considered the mother lode of
outsourcing because it encompasses everything that can be
imagined as being outsourced. It is a very big field.
A quick look at the Accenture Web site makes that company's
direction clear. It now provides 18 categories of services.
Some of the new BPO subsidiaries that have been incorporated
over just the past few years are Accenture Finance Solutions,
Accenture HR Services, Accenture Learning, Accenture
Procurement Solutions, Accenture Business Services for
Utilities, Accenture eDemocracy Services and Navitaire -- a
bewildering number of extensions to the core Accenture brand.
IBM's approach is to keep all BPO work under a single
company umbrella, but its BPO focus in the booming
Asia-Pacific region is obvious by its hiring practices. As one
example, recent full-page employment advertisements in the
Philippines are being used to hire boatloads of people
required for IBM's outsourcing operations. The advertisements
emphasize the need for "previous experience in the areas of
customer care, human resources, employee and payroll
services." Requirements for IT skills are stated farther down
on the page, giving the appearance of being an afterthought.
On the call center side, Convergys is promoting services
like billing and employee care (payroll, benefits and other
human resource services). Sykes says it delivers "total
solutions" to "complement" its CRM services. The large call
center StarTek is probably the most bold. It comes right out
and calls itself a "Business Process Outsourcing" company.
So what is going on? Why does everyone want to be in each
There seem to be two main reasons these companies are
broadening their product lines into areas that are clearly
outside their core expertise. The first has to do with
customer requirements. Large blue-chip clients no longer want
to buy bits and pieces of service offerings from a jumble of
separate suppliers. It's just too complicated and expensive to
manage it all. They want to buy a broad range of outsourcing
services from a few suppliers (or even just one).
This trend has been happening in the IT sector for some
time now. According to Gartner Inc. and most of the major IT
analysts, large outsourcing deals have been the "main engine
of growth" over the past couple of years, and this trend is
expected to continue.
Escaping commodisation is another reason companies are
expanding to new frontiers. The most successful IT companies
have become so large and their project management procedures
so reliable that, to a large and sophisticated client, their
service offerings can be difficult to distinguish from those
of competitors. In other words, they have become commodity
providers -- not that much different from farmers selling pork
bellies. This situation has been apparent in the call center
industry for some time. The IT companies, on the other hand,
aren't used to thinking of themselves in such a manner and
probably don't like it very much. But what unique selling
feature could there possibly be among high-quality companies
like Accenture, EDS, HP, CSC or IBM, other than price?
In order to escape this dead end, everyone wants to move
aggressively into new businesses. BPO seems exciting because
it's new to everybody and industry standards for service
levels and pricing are not yet well developed. As a result,
the sales process is more consultative in nature (rather than
just a discussion of price) and there is much more value to
add. In such an environment, the opportunities for higher
margins are greatly enhanced -- as any salesman would
Where Will It All Lead?
It is very evident that both the large contact center
companies and the IT services organizations will continue to
expand their product lines into BPO and each other's
businesses. However, it's the IT companies and not the call
centers that sign the big outsourcing deals -- anyone who
reads the business journals knows this. Announcements for
billion-dollar outsourcing contracts are becoming almost a
biweekly occurrence for the IT professional services
As well, my information indicates that throughout the
fast-growing Asia-Pacific region, it is almost always the IT
companies that are looking to acquire call center capacity
(i.e., buy call center companies) and seldom the other way
around. If the past is an indicator of the future, then a lot
of people from the call center industry might soon be calling
Offshore Recruitment Outsourcing:
Chalré Recruitment Outsourcing allow companies to
improve the performance and income of their senior recruiting
professionals by directing low value recruiting activities
offshore at lower cost. Call or email for information.
Richard Mills CFA
Chalré Recruitment Outsourcing
t: +632 892 6703
Richard is considered a leading expert on Asia-Pacific
outsourcing by ComputerWorld magazine. His column
called "View from Offshore" is a feature of the
publication. Richard has also been called “the guru on
outsourcing” by Dr. Michael Clancy, President of the
Economist Intelligence Unit (affiliate) and the
"Asia-Pacific expert" by Call Center Magazine. In
addition to ComputerWorld, he is a thought leader for
a host of other international publications.
provided the Keynote Address to the regional HR Shared
Services and BPO conference held in Singapore. He is
an Expert Panelist for CIO magazine (US) and the
Offshore Offsourcing Best Practices association.
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