Outsource To India

Executive Summary

"India has always been a large delivery center with size and the ability to scale and we are seeing the pendulum starting to swing back to it" stated recently to the Economic Times by the Vice President of a large global consultancy firm that monitors global contact center trends.[1]

At the dawn of the Indian Business Process Outsourcing (BPO) Industry in the nineties, voice call centers handled customer service, telephonic sales and collections. The country remained a BPO Leader for more than a decade, before it started losing business to the Philippines (more in the past seven to eight years) owing to a variety of reasons.

Last year, the Associated Chambers of Commerce and Industry in India estimated that the country had lost over 50 percent of the international voice center business to the Philippines.

However, while the Philippines has an advantage thanks to its closer cultural affinity and good infrastructure, as operations progressed they struggled with more restrictive hiring practices (harder to remove underperformers), rising attrition levels (two primary markets meant lots of "same city" competition for talent) and higher wage costs - all of these factors eventually leading to business risks.

Meanwhile, the BPO market in the United States is expected to grow at 4.3 percent CAGR, reaching $97.3 billion in 2017, according to research firm IDC. Even with increased emphasis on firms offering work from home agents and the like, the US marketplace will continue to feel cost pressure and continue to look offshore and near shore for at least a significant chunk of their voice and back office needs.

Recent trends show that India is winning back some voice based BPO services and is posing increasing challenges for the Philippines. Adapting to the changing needs of customers, not only has India been able to showcase expertise with voice services, it has also excelled in multi-channel customer service offerings. This works to its advantage as Business Partners no longer just want customer interactions to be handled at a cheaper cost, and are looking for a lot more from their partner organizations. They want to walk hand-in-hand in order to achieve business goals. Apart from this, there are several other factors that work in India's favor-

  • India as a country is a great partner to work with
  • It has a greater intellectual pool as compared to the Philippines
  • There is a decreasing attrition trend over the last couple of years
  • It is more cost-effective overall to outsource to India

"We have a large e-commerce company that asked us to move some jobs to India because there are better skills here to both sell and upsell services. We moved 600 jobs here from the Philippines for this client," Sandip Sen, CEO of Essar Group's BPO arm Aegis, told ET.

A Quick Comparison - India versus the Philippines

When it comes to BPO services, both India and the Philippines are quite well known for being the top choices for large multinational organizations. They both have their own unique selling points when it comes to delivering value in outsourcing. Also, while the competition between them gets stronger each year, each of these countries continues to capitalize on something that the other cannot offer. For e.g. clients of Philippines-based firms have been relatively more comfortable with the accent, communication & soft skill aspects of transactions, while the firms outsourcing to India enjoy more analytical and technical expertise as needed for their business.

India has been an older player in the IT & ITES sector and has a considerably larger share of the pie as compared to the Philippines [About $118 Billion, in contrast, the Philippines’ share stands at around $15 Billion, approximately 12.7% of India's share].

So, while some investors and outsource shoppers have been looking at the Philippines mainly because of their accent and soft skill capabilities, India still remains quite attractive with great price levels and a greater overall maturity of the industry (it has a better developed ITES ecosystem, and an easy availability of resources and skills for all kinds of IT & Transactional BPO outsourcing).

Taking a deeper look at the current cost structures of service providers of both countries (factoring in all operating costs, with special consideration to the cost structure of Tier 1 cities where most of the industry is clustered), India actually has a significant advantage as the overall cost of operations in the Philippines is higher. A relatively weak rupee to the US dollar dynamic is creating a dynamic where outsourcing services that used to cost $12.50 USD per hour is now available for $11. Meanwhile, Philippine price points, which used to be 10% higher than India’s pre rupee fluctuation (so $13.75 compared to $12.50 in India) continue to increase due to the limited volume of available employees and more restrictive retention approaches. A gap of $3 USD or more per hour is now very typical.

The overall quality of infrastructure in the both the countries is also largely comparable. However, one of the key differentiating aspects for India is its spread of about 50 key delivery locations where IT & BPO delivery work is carried out. The Philippines, on the other hand, has only one or two main destinations (Manila and Cebu). Thanks to this, India is able to boast superior scale and overall ecosystem for a robust inter-city BCP operating environment.

A Quick Comparison - Offshore versus Nearshore

While the advantages of global outsourcing are well known, there is a difference between outsourcing to an "offshore" distant country and to a "near shore" closer country.

The reasons for choosing one over the other are usually cultural. To some organizations, offshore outsourcing may appear to be riskier and more complex. On the other hand, near shoring is considered to be relatively easy considering the similarity in the geographical, political, historical and cultural backgrounds of the two countries. There are also a few auxiliary benefits of near shoring such as being on a similar time zone, allowing business transactions to be executed during the same time as the customers. Also, site visits or related travel can also happen faster and more frequently.

However, when compared to offshore options, nearshore outsourcing definitely causes a more significant dent in the budget. While it is still cheaper than getting the work done onshore, nearshore entities tend to be pricier than their offshore counterparts for the very same reasons they stand out - their geo-political position.

However, when compared to offshore options, near shore outsourcing definitely causes a more significant dent in the budget. While it is still cheaper than getting the work done onshore, near shore entities tend to be pricier than their offshore counterparts for the very same reasons they stand out - their geo-political position.

Plus, the economic or political conditions of neighboring countries may not always be profitable for an outsourcing venture. For instance, an American company outsourcing projects to Canada would end up paying almost the same rates as they would onshore. Therefore, such a venture won't translate into monetary savings. Instead it would add additional expenses for travel, legal affairs, etc. and the only gain would be to open up trade between the two countries.

Overall capacity is also a challenge for many popular near shore venues. By and large, these venues are smaller countries in central and South America, which only have a finite quantity of skilled or trainable resources. Many "hit a wall" in terms of available resources fairly quickly and those who try to expand near shore services beyond this face declining productivity.

Eventually when considering the cost, given all of these factors, near shore companies can never compete with the hourly rates of offshore companies. Also, given the fact that offshore companies consistently work to reduce their limitations (contributed by geography, and cultural differences) through the 24/7 support model, development of linguistic capabilities, better analytical resource availability, etc. the level of service offered by offshore entities is almost at par with their near shore competitors.

In the end, based on the cost-benefit ratio, of the two outsourcing options, offshore does win more points, and as a result, continues to be the largest benefactor of global outsourcing seats.

What is the recommendation from one global outsourcing veteran?

I've run several thousand FTE operations in North America, South America and Asia. From these experiences, the data points cited within this document and my personal experience, if I were making decision to outsource now, I would strongly consider India again for your voice, as well as back office, needs.

Here are several reasons why --
  • Meanwhile, the Philippines political climate has deteriorated

The new President of the Philippines, Rodrigo Duterte, is seemingly creating a deteriorating business environment for global organizations. In his first few months in office, international news coverage reports the widespread killing of suspected drug dealers---hundred and hundreds across the country. This “death squad” approach made him famous when he was mayor of Davao, but is controversial and not aligned with global norms. In September 2016, he insulted the President of the United States in advance of a scheduled meeting---and the President appropriately cancelled the event. In office since only July, his behavior is already creating concern among some in the global outsourcing community. Quoting one senior executive of a Fortune 500 firm that outsources “over a thousand FTE” there now, “I’m watching dynamics closely. We cannot have a business traveler environment that poses any risk to our clients or employees who may want to go on site. The “vigilante” approach is scary!’

  • India has great intellectual talent and can offer a higher ROI though bundled analytics (because it India has the skills)

Gone are the days when clients were just looking for an organization to listen to customer interactions. Now there are a lot of unsaid needs that the clients are looking to fulfill. With its intellectual ability, India has been able to offer analytical expertise leading to high returns on investment. With the demanding nature of the industry and the customers, there is a constant need to offer more and newer approaches that live up to the expectations and meet the needs of the end user. It should be noted that to keep up with the "raising of the bar" by clients requesting more advanced analytical data along with the performance itself, the Philippines actually has over 100,000 supervisory, managerial and analytical support resources on the ground from India. Going to the source country instead, provided you select partner(s) who have the DNA to deliver both, the above goal services and value-add business insights, has an absolute and significant positive impact on your ROI.

As technology advances enable greater ability to extract data (content and volume), the ability for BPO to evolve from the learnings derived from these new analytics is suited for India service providers, and has been rapidly gaining prominence to adopt machine learning as necessary element of data preparation and predictive analysis in businesses. All companies are data businesses now, and India's analytical talent pool, being much larger than it’s neighbor, The Philippines, or any other global BPO destination too, is enabling many global brands to drive value and revenue from their data. Key technologies like speech analytics and social media science in the contact center space have been the hallmark of India's healthy growth and continued lead over rest of the outsourcing destinations globally.

  • When adding up ALL costs (labor and infrastructure), India is LESS EXPENSIVE

The governments of both countries are open to foreign investment and facilitate globalization. However, the Philippines are relatively new to the outsourcing business. With better infrastructure and technology, India offers cheaper rates. The population and the average age also serve as a huge advantage for India giving it a stronger future in the BPO Industry.

It is the seventh largest country in the world with a population of over 1 billion according to a 2011 census. In contrast, the Philippine's population is just 94 million according to a 2010 estimate. Plus, over 50 percent of the population is below 25 years of age, which works well in terms of the younger generation being more aligned to business needs. There is a pool of thousands of graduates and post-graduates created every year by India's education system, which is much needed for the BPO industry.

With respect to technology, data entry jobs are still there in India, but the complexities of the outsourcing projects it is undertaking is increasing day by day. Indian technological institutes are world-class and help develop talent with good technical expertise. The Philippines is catching up in this field, but it still needs to grow a lot to match the IT infrastructure.

This ISP, networking and telecom brilliance make India strong in the outsourcing business

  • Decreasing attrition trends in India translate into even greater value--

Offshore attrition levels have never been as high as onshore attrition rates, but have been steadily increasing. Sometimes it is not unusual to see an annual attrition rate of 60% for some specialized offshore voice processes, but in the end they have a large impact on the overall cost.

Recent studies show that smart Indian BPOs are utilizing a variety of methods, starting with the selection process at the hiring level (much more sophisticated assessment of voice and listening skills as well as "fit" of applicants within the organization) and continued till induction training, nesting as well as production, to cut down on attrition rates.

Also, when it comes to performance, the top voice agents in India have always performed as well or better than the top agents from the Philippines. The challenge was always that after the top tier, Indian voice agent quality was not as consistent and therefore, overall voice performance was lower.

However, the investment that smart outsourcers now leverage to find the best voice agents ensures a greater emphasis in building a work culture that ensures those same agents will stick relatively longer with the organization. Smart outsourcers have discovered that through a more elaborate selection process, the "cream" can be identified, nurtured and retained.


In summary, even companies who tried India for voice before and then decided to move it elsewhere, would be well served to take another look at India for selective voice outsourcing needs. It requires finding outsource partners who have the experience and innovation to leverage smart hiring to build and retain teams that can meet voice quality needs, as well as a deep focus on analytics so that the overall value delivery will encompass the whole package. Companies that do this will be able to enjoy a significant return on investments.


Economic Times, Aug 14, 2014

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