It's time again to have a look at the geographies of the world and how they're fairing with their offshore call centre companies.South Africa recently won theNOA destinationof the year but is it a fair assessment?
At the recent NOA awards, South Africa won the destination of the year award. Although I’d like to say congratulations to South Africa, I think it’s worth looking at what is happening with the popular offshore call centre locations.
Firstly, the NOA award isn’t all about call centres. However, as the winners over recent years have been The Philippines (several times), Egypt and now South Africa, it’s fair to say that it’s fairly relevant to the call centre industry. Given that neither India nor The Philippines entered this year, South Africa can’t really claim to be the number 1 destination.
It’s probably best to start with Asia which still dominates the offshore market but has seen a massive swing from India to The Philippines. In 2002, I wrote an article called the future of offshore call centres in which I predicted that The Philippines would overtake India in terms of number of call centre agents. All (and I mean all) of the feedback I received said I was wrong and given that the industry in The Philippines then was incredibly small, then I’m not surprised at the feedback. The Philippines is the number 1 player but its popularity has reduced its competitiveness. Salaries haven’t gone up as much as could be expected but there’s huge demand for staff and attrition rates are high. India on the other hand seems to be in a permanent state of decline (or at least to the untrained eye). India is actually a strong destination. The tier 1 vendors really have improved and in many cases are as good if not better than the Filipinos. However, the issue is one of buyer-perception. India has still not shaken off the weak reputation in gained some years ago and clients who visit both India and The Philippines almost always end up choosing The Philippines. Of course, perception is reality and I expect The Philippines to continue to grow although at a smaller rate and some of this will be at the expense of India. The difficulty for The Philippines is that given that so much of its delivery capacity is in “voice”, it’s hard to see where the growth areas will come from unless The Philippines education system has a huge overhaul in terms of the teaching of other Asian and European languages. Outside of these 2 countries, there really isn’t much of an industry to talk about. Yes, there are call centres in Pakistan and Malaysia but the numbers of call centre agents is low and there doesn’t seem to be anything indicating that this will change. Malaysia is more expensive than India or The Philippines without any apparent advantages & it’s hard to see disgruntled clients of Indian call centres suddenly deciding that their future is in Pakistan.
In Africa, the numbers are much smaller than in Asia. The people promoting South Africa have a very good p.r. machine. Indeed some major companies such as Centrica have chosen South Africa but it doesn’t help the image of the country when Virgin Media suddenly decide that to close down their outsourcing there and move it all to The Philippines. There are some very good incentives for South Africa and it’s hard to have a chat with anyone related to the industry there without that coming up. I’m pretty sure that this will be one of the reasons that the industry grows there over the coming years. The difficulty for South Africa might come when these incentives end and given the amount they’re costing, this won’t last forever. Elsewhere in Sub-Saharan Africa, there are some small success stories. Countries like Kenya and Ghana have call centre industries. They’re not vast in terms of the numbers of people they employ but they’re making slow but steady progress. If there’s 1 country which has really suffered in Africa, then it’s Egypt. Anyone who attended Call Centre Expo in 2008 couldn’t help but see the huge stand they had. Over coffee, a group of us estimated that it had cost them upwards of £50,000. Representatives from Kenya were then at every event I could imagine and paying to sponsor for a long period. With large government coffers and a desire to fill jobs for its many young people, Egypt really went after the business from The UK and USA. Unfortunately, it never really happened. Many of the large outsourced vendors had locations there and they did win business. However, the crash came with the political instability and the overthrow of their President. Some years before, I’d been in the audience at a presentation by a group representing Egypt at an NOA event in London. The presentation was effectively mocking India & The Philippines. A big part of their message was that Egypt had a stable Government and stable neighbours. The “stable neighbours” message was clearly about India-Pakistan relations with the implied message that you shouldn’t outsource to India because this conflict could disrupt your operations. Given that Egypt’s neighbours include Syria, Sudan & Libya, this was actually a daft message. The “stable government” message was aimed clearly at The Philippines but The Philippines went through their “instability” in the years immediately following their return to democracy in 1986. It’s now a far more stable country than Egypt. Egypt’s message at that event have really come back to haunt them. Nobody knows what’s going to happen with the political situation in Egypt and this is keeping potential clients away.
In Europe, the market for offshore services really comes from Eastern Europe. There are offshore (or nearshore as they always say) in countries such as Lithuania, Poland and Romania. The industries there are relatively small with their key proposition being their ability to service multi-lingual clients. Given that all 3 of these countries will join the Euro once the current financial situation is resolved, it’s hard to see these countries ever being especially competitive as to justify shifts to these locations away from Asia.
Elsewhere, there are pockets of call centres in The Caribbean and South America. Some of these do have UK clients but the number of people involved servicing the UK market is very small. These countries are really nearshore destinations for US based companies.
Overall, we are likely to see the industry in India contract by a small amount over the next few years but then flatten out and start to grow from 2015. The Philippines has another couple of years of growth but from 2015, growth will be flat. South Africa is likely to see a large number of new clients in the next 3 years. Its overall size will still be small compared to The Philippines. It’s hard to predict specific percentages for growth in countries like Ghana as 1 large client could have such a big difference but I really don’t see that happening. The market in these countries does have potential to grow if they market themselves correctly. Egypt’s entire industry could collapse if the situation in the country does not improve quickly. There are plenty of other options for clients of outsourcers and so it’s imperative things change.
- If you would like advice on outsourcing call centre activity to South Africa, please feel free to contact me on 0121 364 4000