In 2002, I predicted that the call centre industry would overtake that of India. In response to that article, I received a lot of emails all of which stated I was wrong. Given the relative sizes of the industry at the time, it was a brave call which turned out to be correct. Of course, I wasn’t certain but it was a hunch based on what I was hearing in the market.
12 years later, I’m going to make a prediction which is equally as brave. I’m predicting that between 2015 & 2017, India will retake some market share back from The Philippines. The so-called industry analysts will tell me that I’m crazy for this prediction but they don’t spend every minute of their work day in the industry.
So, let me explain why I think this will happen. Firstly, you need to understand why the industry moved away from India and towards The Philippines. You can split these reasons into 2 sections; what was wrong with India & what was right with The Philippines but they basically fall into these broad categories:
(1) Poor perception of India
(2) Weak middle management in India
(3) High attrition in India
(4) Rising costs in India
(5) Better voice/accent in The Philippines
(6) Better tax incentives in The Philippines
(7) Easier recruitment in The Philippines
In short, in The Philippines you could get better people who wouldn’t be so quick to leave and they would have better English, better accents and you could do it for roughly the same price as you could in India. It was therefore no surprise that call centres moved in their droves from India to The Philippines. So, my prediction back in 2002 was more than a hunch. It got to the point in my business that companies simply stopped asking about India.
To understand why the trend is about to change, you need to understand what has happened in recent years and what is about to happen. The best way to describe this is to talk about a conversation I had with an executive of a large call centre outsourcer many years ago. They’d grown in India but were about to switch their focus to The Philippines. He told me that India was starting to get too expensive, it had become harder to recruit and retain enough good agents and that the Government were cutting back on tax incentives. Today, I could quite easily be having this exact same conversation with a company about moving away from The Philippines. So many call centres have set up in The Philippines, that is now harder to keep and retain suitable staff and anyone who thinks that the very generous tax incentives offered by The Philippines will last forever is simply kidding themselves. However, one key issue will be how the peso has become far stronger than the rupee against major international currencies. This has led to India becoming 30% more price competitive than The Philippines. Of course, many will say that all of this doesn’t matter if the voice & accent is so much better in The Philippines. As odd as it may sound, the difference in voice and accent of an “average” agent is reducing between the 2 countries. It’s true that a higher percentage of Filipinos speak English compared with their Indian equivalent and the “typical” Filipino accent is easier for Westerners to understand. However, the sheer demand for call centre agents in The Philippines has led to a decline in their hiring standards. Last week, a new client of mine who was having problems with a Manila call centre sent me some call recordings to listen to. I was shocked at the low quality of the agent and I really struggled to understand their accent. 10 years ago, there was no way that this agent would have got a job in a call centre.
Before I receive a deluge of angry emails, I must say that I still think that The Philippines is a good location for call centres but standards in Manila & Cebu have dropped dramatically which could be an opportunity for India and indeed other locations. If I look back 10 years, the best call centres I worked with were all the very large, global companies all based in Manila and Cebu. These days, the best call centres I work with are small vendors in the smaller cities. Outside of Manila, attrition is still low, costs aren’t rising and they have not had to lower their standards in order to hire enough agents. In contrast, Indian costs have actually been reducing in dollar terms and the reduction in demand has actually led to an increase in quality.
Some might say that if growth slows down in The Philippines, the growth will go to other offshore locations or even come back to The UK or United States as opposed to India. After all, many companies already have a bad experience with India. To an extent, that is true but despite all the negative publicity, there are plenty of companies who have always been successfully outsourcing call centres to India. There are also many companies who outsource to both India & The Philippines. Many of these are telling me that their Indian operations are exceeding their Philippine equivalent. As contracts come to an end, India will take more of the work from The Philippines. The other interesting fact is that so many of the call centres in The Philippines are Indian-owned. In an assignment last year, a client had short-listed 3 vendors in The Philippines, all of which were Indian owned companies which also had operations in India. I asked all 3 the following question “If we gave you a trial project and you could decide whether to place it in India or The Philippines, which do you feel would be the most likely to succeed?” All 3 gave me the same unambiguous reply of “India!”. Of course, the decision as to where work is placed comes down to the clients as opposed to the vendors but it’s quite clear that the most Indian companies would rather promote their Indian operations over their Philippine ones. There is also little evidence to suggest that other offshore locations will take any significant share away from India or The Philippines. There is a movement towards some call centres coming back onshore but that is irrelevant to the India v The Philippines debate.
The good news for The Philippines is that good call centres need not worry and I’m not predicting a slowdown in the industry. I’m simply saying that the growth forecasts overly-optimistic and that it won’t be long until the growth in India exceeds that of The Philippines. It will not be as dramatic as the switch which led to The Philippines overtaking India. India does still have a negative perception issue which is a hangover from last decade. However, it’s quite clearly time to start looking at India again.