5 years ago, we wrote the ground-breaking “future of offshore call centres”.  The report pre-empted the explosion in offshore call centres, massive growth in The Philippines market-place and the public backlash against offshore call centres. 

Back in 2002, the industry was in what we termed “The Honeymoon Period”.  The industry was considered a sunshine industry and seemed to be loved by clients, Governments, Investors are employees alike. 

After the explosion in offshore call centres, the industry now finds itself in a very different position.  The investors are now looking for a return on their money, some work has been brought back onshore and attrition rates are through the roof.  There are a number of positives as the industry has now reached a level of maturity.  Lessons have been learnt from the initial mistakes and a number of the less professional players have already left the industry.  The overall offshore call centre market is now bigger than ever with future growth anticipated.  So what will happen in the next 5 years?

The Future?

The market has now reached the consolidation (maturity) period we had predicted.  There are effectively 5 key trends set to take place in the offshore call centre industry:

 

As we had predicted, the vast majority of the work being offshored would be English speaking work.  The next 5 years will see increased offshoring of non-English activity.  Unfortunately, the countries which dominate the English market such as India and The Philippines have poor skills in other languages.  Cantonese work is already being offshored to Southern China and this will grow.  French work will increasingly be performed in Africa and Canada, Spanish work in South America and German and Italian work will be conducted in Eastern Europe. 

 

After the initial success of offshore call centres, a number of local entrepreneurs around the world set up outbound call centres.  With the growth in the number of CPS (Carrier pre-select) telecommunications companies such as Homecall, OneTel and Talk Talk, many of these centres helped during their acquisition mode.  With deregulation in the electricity industry, many of these companies also used offshore call centres to increase their customer base.  These projects typically paid on a cost per acquisition model.  With consolidation in those industries, these call centres have moved into other areas such as selling mobile phones.  With the massive increase in the volume of calls received by British households (and the low quality of many of these calls), the numbers registered on TPS has grown exponentially.  There has already been a number of these companies go out of business and with tightening legislation, poor public perception and diminishing returns, many of these centres will not exist by the time we update this article in 5 years time.

Over the last few years, we have seen a trickle of offshore call centres being bought.  Indian based Daksh was bought by IBM, Customer Asset by ICICI and more recently SITEL’s global entity was bought by Client Logic.  With the increased commodisation of call centre services and decreasing profit margins, the industry seems poised for a period of consolidation.  Many people often question the economies of scale that can be gained from larger call centres.  However, with clients of outsourced call centres continuing to impose a dominant position over their vendors, any reductions in unit cost of delivering outsourced services is welcome. 

Many of the larger ventures are already in profit but there are some which are not.  With the offshore industry maturing, investors are far less hungry to continue to back loss-making ventures.  It seems inevitable that the process of natural selection will take place and the strong will eat up the weak.   

 

In a market which is viewed as becoming more commotised, vendors are continually looking at ways of differentiating themselves from their competition.  To date, most offshore call centres have typically promoted themselves to the entire client market but this will change.  There is now a great deal of expertise in the offshore industry and this needs to be exploited.  Some companies will specialise in vertical sectors and some will focus on particular applications such as technical support or outbound.

 

With cities like Bangalore, Mumbai and Manila already full of call-centres, we have already started to see call-centres moving to other cities within India, The Philippines and elsewhere.  This trend will continue with smaller cities being call centre locations.  We have also started to see other countries such as Egypt, Romania and South Africa emerge as destinations.  Over the next 5 years, we will see an increase in the number of positions in all of these geographies.

 

Most clients believe that there is a risk associated with offshoring any activity.  With so many potential vendors and locations, larger clients are already seeking different vendors in different locations.  This enables them to have greater leverage over their vendors and to avoid potential pitfalls if one of their outsourced vendors is unable to deliver.

The latest Data Monitor report shows that Asia will continue to dominate but these markets will increasingly become focused on their domestic market.   They also noted that new customers such as Canada, Australia and New Zealand will continue to adopt Asian outsourcing markets, in addition to mainstay clients like the UK and the US.

Conclusion

The next 5 years will be interesting for the offshore call centre outsourcing industry. We are likely to see some clients revert to having captive centres and the larger players increasingly dominate.  There will be less vendors in India and The Philippines than there are today but they will be more professional and more evenly spread out around the countries.  Prices for vendors will actually start to slowly rise as profit margins have been squeezed too far and there is already wage and real-estate inflation in the key areas.

 

 

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