SA examines India's call centre success
BY NKULI MNGCUNGUSA, ITWEB TRAINEE JOURNALIST
Johannesburg, 12 July 2005
The South African Contact Centre Community
(Sacccom) will host a one-day conference in Johannesburg at
the end of this month to focus on India's success as a world
call centre destination.
“SA is steadily improving its positioning
as a destination for offshore investments with a number of
exciting reference cases emerging, spurred on by government
initiatives such as the deregulation of the telecom industry,”
The conference will cover the importance
of call centres and job creation in SA and other parts of
the world, and will look at how India succeeded.
The local call centre industry has grown
at about 8% per annum over the past four years and employs
about 54 000 call centre agents, contributing almost 0.92%
of the country's gross domestic product, says Sacccom.
“Early estimates indicate that, with
appropriate focus, institutional support, and targeted government
and industry interventions, an additional 100 000 jobs can
be created in the call centre sub-sector by the end of 2009,”
Speakers at the conference include Sacccom
CEO Mfanu Manyela and India's National Association of Software
Services and Communication president Kiran Karnick.
Issues to be addressed include the business
process outsourcing sector support strategy and a presentation
of the sector's five-year plan.
Sacccom says that while SA has the potential
to compete for world contact centre business, it faces challenges
such as a shortage of middle management skills, higher cost
of operations than key competitors, negative perceptions of
operational risk, and relative difficulty of setting up new
operations in SA.
The conference is open to CEOs, CIOs, industry
executives, call centre managers, IT managers, sales and marketing
managers, HR and training managers. To register, e-mail firstname.lastname@example.org.
South Africa seen as India's rival in outsourcing
Sunday November 21 2004
By Sumeet Chatterjee, Indo-Asian News Service
Mumbai, Nov 21 (IANS) South Africa may emerge
as India's rival in business process outsourcing, thanks to
its better infrastructure, low labour costs and cultural advantages.
The number of call centres in South Africa
will double in four years, says a study, "South Africa:
An emerging offshore location", conducted by Britain-based
independent market analyst Datamonitor.
Offshore agent positions are also expected
to quadruple from the current levels, says the report made
available to IANS. Agent positions are terminals from which
call centre operators make and receive telephone calls to
internal or external customers. Multiple agents can use the
same agent positions during varying shifts in a day.
"South Africa will occupy an important
position in firms' global operations portfolios," says
"It will slot in between near-shore
locations such as Canada and Mexico, which offer close proximity
and also cultural affinity (to the US), and more traditional
offshore locations such as India and the Philippines that
offer cheap labour."
The report says South Africa offers a higher
quality, more culturally aligned front-office and back-office
location where labour costs run at two-thirds of their US
or British equivalent in the business process outsourcing
Datamonitor expects there will be 939 call
centres in South Africa by 2008 - almost double the current
number of 494, registering a compound annual growth rate of
14 percent during the period.
The total number of agent positions is predicted
to rise to 69,600 in the same period, according to the report.
Currently, as many as 70 percent of South Africa's offshore
customer service agents serve clients in the British market.
Most of these agent positions are located
in the Gauteng province - more specifically, in Johannesburg.
However, Datamonitor expects the balance will shift in favour
of Cape Town in the Western Cape Province soon.
"South Africa is not as much of a labour
arbitrage cost play when compared to India and the Philippines,"
says Ryan Powell, Datamonitor call centre analyst and author
of the study.
"It, however, offers multilingual and
non-English language agents that are better able to deliver
more differentiated customer service based on greater empathy
and closer cultural affinity," he says.
"These services are offered to customers
in key target markets such as the US and European countries
like Britain, Holland, Germany and France."
The Dutch market is expected to be the biggest
non-English language market that is served from South Africa.
South African call centres are expected to
provide higher quality customer service and sales services,
with a particular focus on the financial services industry.
"The established call centre industry
means middle managers already exist. Top-up training will
bring those people up to suitable levels whereby they can
best meet their offshore clients' requirements," says
"State-funded learner-ships are helping
to fill the staffing pipeline to the industry for the longer-term
needs," he adds.
The promised deregulation of the telecom
market will bring about greater price competition, stimulating
further demand for offshore operations in South Africa, said
India's educational system and training programmes
have helped transform the country into a global outsourcing
superpower. The $2.6 billion business process outsourcing
(BPO) industry in Asia's fourth largest economy has now become
one of the top money-spinning ventures for the country and
is set to grow at a dazzling clip in the years ahead.
More than a quarter of Fortune 500 companies
like General Electric, American Express, British Airways,
HSBC and Citibank have shifted their back office operations
Govt, business talk investment
6 April 2005
South Africa's potential as a site for international
business outsourcing, particularly for job-creating call centres,
was a key element of the latest round of discussions between
government and business in Cape Town on Tuesday.
Although President Thabo Mbeki did not attend,
several Cabinet ministers held talks at Tuynhuys with a number
of the country's business leaders, including Cyril Ramaphosa
of Johnnic, Saki Macozoma of Safika Holdings and Bobby Godsell
of AngloGold Ashanti.
South Africa 'all clear for take-off' - Ten
of the world's most powerful businessmen tell President Thabo
Mbeki that SA is better placed than ever before to take economic
growth and job creation onto a higher plane.
Key issues raised included the need for a vigorous programme
for skills development and a more focused development of sector
strategies, particularly regarding job creation and sales
expansion, Trade and Industry Minister Mandisi Mpahlwa said
after the meeting.
Concerns around implementation capacity were
raised, and business called for a bolder approach from the
government to ensure higher economic growth and development.
David Brink of construction company Murray
and Roberts told journalists afterwards that the government's
programme of action was "very action-orientated",
but said that business and government had to move fast to
attract call centre operators to South Africa.
Hot line from the Cape - SA call centre numbers
are expected to double in the next four years - and Cape Town
is hotter than India when it comes to service, recent research
Both parties agreed on the need for a more co-ordinated approach
to developing South Africa's potential for hosting call centres,
through facilitating permission for firms, boosting infrastructure
and creating enticements.
This potential lies in the fact that South
Africa is an English-language environment in the same time
zone as most of Europe, placing the country well against competitors
like India, the Philippines, Hungary and China.
Other key issues discussed were the performance
of the country's sector education and training authorities
(Setas) in developing much-needed skills. Business proposed
a high-level task team to examine the performance of Setas.
South Africa's hosting of the Soccer World
Cup in 2010 came up, with the parties agreeing on the need
to work together around preparing for this.
There was also discussion around the implementation
of the recently released report of the Commission for Africa
and the need for "leading lights" in the G7 group
of industrialised countries to "profile Africa differently"
- to highlight the continent as a key place to do business.
The perennial problem of increasing investment
- not only foreign but also internal investment - was also
Bink said "the government has done so
well over the last 10 years" with fiscal restraint, managing
the economy and keeping inflation under control, that there
were now opportunities to find new ways of increasing investment.
Cape Town emerges as call-centre capital
Engineering News -
Although he started his career in London
in investment banking, CallingtheCape executive director Luke
Mills seems to be custom-made for the call-centre industry,
rather than a pinstripe suit.
Although he started his career in London
in investment banking, CallingtheCape executive director Luke
Mills seems to be custom-made for the call-centre industry,
rather than a pinstripe suit.
Mills doesn't miss a beat when talking about
the call-centre industry and explains that he is so passionate
because it has many positive spinoffs for the country.
It not only provides employment for people
from previously-disadvantaged backgrounds, but also incredible
amounts of upskilling that are bringing South African companies
and employees in line with international standards.
It empowers women, as most of the people
who work in call centres are women, and it empowers the young;
the average age of a contact-centre agent is about 25 years.
"It is a very meritocratic industry
and people who enter on the bottom level and excel as agents
become team leaders, then supervisors, then contact-centre
managers, so there are wonderful opportunities to develop
leadership for people who have not had many advantages in
life," says Mills.
"Once they have developed those leadership
skills, the world is their oyster - they can stay in a management
role, they can move into the human resources or information
technology department or they can set up their own businesses,"
CallingtheCape, a government-backed specialist
development agency that promotes the Western Cape as a destination
for national and international investors, sees the contact-centre
industry as being a crucial bridge between the first and second
economies that President Thabo Mbeki refers to and, at the
same time, an industry in which South Africa can compete with
the best companies on the global stage.
"We need more of these kinds of industries
and we need more financial and political support at the highest
levels," says Mills.
Political support has been forthcoming for
the call-centre industry, with the liberalisation of the telecommunications
industry last month.
"I think deregulation is a strong sign
from government that it is serious about this industry; it
is crucial to this industry, we lobbied for it and we are
delighted," says Mills.
"It gives us another big push in the
"We are now in a position where we can
compete on service, on the type of products that are on offer
and more or less on price with any other offshore destination,"
Mills believes that Telkom deserves credit
for the effort that it made to get the call-centre industry
more competitive by introducing a solution a couple of years
ago which, although it wasn't an end-to-end Voice over IP
(VoIP) solution, involved some elements of VoIP, enabling
rates for contact centres to fall to about 30 c to 45 c a
minute for international calls, depending on volume.
He points out that, even though that is much
lower than the retail price that South Africans pay for making
an international call, it is still seven times higher than
companies are paying in other offshore destinations.
Mills explains that in India, the Phillipines
and Malaysia, for example, companies are not paying for calls
on a per-minute basis, but are buying lease-line capacity
from telecommunication companies, managing their own networks
and deploying VoIP technologies.
Information and communication-technology
company Storm says that, at its simplest, VoIP technology
converts voice to data and transmits it via a digital network.
This means that a company can make international,
cellular and national telephone calls at reduced rates, cutting
its phone bill dramatically.
VoIP is standard technology in most developed
countries and is used commonly by large companies between
their offices to reduce telephone costs and to allow call
centres to be centralised but, where customers still call
a local number - you call the call centre number in your local
town - the call is then routed over a VoIP network to a contact
centre that may even be in another country.
Since the opening up of the telecommunications
market in South Africa, all of the value-added network service
providers (VANS) have been able to offer VoIP technologies
and, as a result, prices for connectivity have come tumbling
"The price of a 2 MBS lease line using
multiple-packet labelling system (MPLS) technology from South
Africa to the UK or to the US is now below $200 000 a year,"
"It is difficult to compare 2 MBS lines
with per-minute charges, but our calculations suggest that
the price of $200 000 is probably half of what the cost would
have been on the old Telkom regime," says Mills.
"The equivalent price in India is probably
about $150 000; so we are still a bit more expensive but in
the same ballpark," he says.
The number of customer interactions globally,
particularly in the de-veloped world, is continuing to increase,
which is putting massive demand on call centres in countries
like the UK, the US, the Netherlands and Germany.
"Not only are these call centres getting
very expensive to run, but they have also got high attrition
and it is difficult to recruit new staff," says Mills.
Offshore is a business imperative if international
companies are going to continue to provide increasingly demanding
customers with the services that they require, and countries
including India, China and South Africa have the opportunity
to grow their offshore business.
Mills thinks that India is going to remain
the premier destination and is probably always going to account
for 40% to 50% of all offshore contact-centre work but, for
reasons of risk concentration, operational reasons and also
because companies realise that there are some things India
can do well and some things not so well, there are other destinations
which are going to be in the second tier.
South Africa, along with the Philippines,
China, Malaysia, Canada, Israel and Ireland, is in the second
tier, but the question is - is South Africa going to be right
at the top of the second tier or is it going to bubble along
and be in the middle or at the bottom of the second tier?
Mills believes that South Africa has several
advantages that could place it towards the top of the second
"The order in which companies put business
streams offshore is determined by the risk and the capex of
putting them offshore, so the transactions that go offshore
first are those that are relatively low-risk and do not require
a lot of investment," he says.
Back-office processing is one example, and
that work went to India first.
"In South Africa, we have not seen a
great deal of back-office processing, but we have seen a lot
of customer-contact work, starting with relatively simple
transactions, such as outbound sales, which is tightly scripted
and a relatively straightforward customer service," says
But, as companies in the US and the UK, in
particular, have outsourced a lot of their low-risk, low-investment
items, they are left with unscripted, complex voice interactions
An example is when a customer calls into
a contact centre for any one of 15 or 60 different reasons,
as happens in financial services or travel, for example.
In these transactions, the agent does not
know what to expect and that re-quires a much more skilled,
not necessarily better-educated, agent and an agent who speaks
English to a customer whose first language is English to ensure
that the communication between the agent and the customer
That agent will probably require three or
four months of training, and that means that the capital costs
are going to increase.
"A good portion of this complex work
is going to go offshore and that is starting to happen now,"
Companies have put that kind of work in India
and in some areas it is working successfully, but in other
areas not, and a number of blue chip com-panies that have
put that voice work in India have pulled it out and are looking
for somewhere else to go.
"South Africa has a massive advantage
over India in this respect because the agents in South Africa
who are doing international voice work, by and large, have
English as a first language or are completely bilingual,"
"While the agents in India might be
graduates and very smart people, English is their second language
and they are struggling with this kind of work, as they are
not picking up the nuances or the slang and are not responding
in the right emotional way to what is being said," he
If you look around the world for low-cost
competitive labour destinations, which have large concentrations
of English first-language speakers, there aren't that many.
Canada and Australia are already relatively
high-cost destinations, Eastern Europe's first language is
not English, nor is the Philippines, and they are going to
have the same problem that India has.
South Africa, therefore, has a huge opportunity
to be a niche player focusing on high-value complex voice
"That has been our sales pitch from
day one," says Mills, "and the evidence thus far
from companies that have moved to South Africa has been extremely
Companies like Budget Insurance are reporting
that their call centres in South Africa, which are handling
relatively complex customer service and sales, are performing
as well as their call centres in their home markets and are
among the best-performing call centres in all their offshore
CallingtheCape thinks it is now in a position
where it can go out and compete for larger-scale business
and hopes to secure a commitment from at least one global
multinational outsourcer to develop operations in Cape Town
"If a major global outsourcer invests
in the Cape it will probably grow to 3 000 to 4 000 seats,
and that will take us into a whole new ball game," says
"If it doesn't happen, we will still
have a growing offshore industry," he says.
New investment commitments of R380-million
were made in the Western Cape call-centre industry last year,
resulting in growth of 25% and over 2 000 new jobs.
"Based on what we have in the pipeline
and in expansions, that is expected to be matched this year,"
He adds that last year was a year in which
the talk and promise of growth in the contact-centre and business-pro-cess
outsourcing (BPO) sector became a reality.
High-profile international companies like
Ambition 24 Hours Group, Budget Insurance, STA Travel/Lufthansa
Process Management and Sales Engine invested in call centres
and BPO units in Cape Town during 2004.
Other international companies - Pixel Faerie,
State Street, Grove Group and Intelligent Business Solutions
- also invested last year, joining already-established companies,
such as Dialogue, Northern Communications and Aerocorp.
Mills says that, apart from the new investments,
14 of the existing operations expanded during 2004, adding
almost R44-million to investments.
There are now 110 operations in the Western
Cape and, at last estimate, over 13 000 people were working
in the industry.
Further significant investment has been clinched
for 2005 and, in the first three months of this year, a few
new local outsourcers and one new German-owned outsourcer
have set up in Cape Town.
Data Monitor reports that there are 494 call
centres in South Africa and predicts that there will be 939
The company says that the number of offshore
agents in South Africa in 2003 was 1 400 and that this figure
will reach about 6 000 in 2008, which would put South Africa
in the middle of the second tier.
Mills believes that this is quite a conservative
"I think that we should be able to do
a lot better than that; one major investment from a global
outsourcer, and that target will be burst wide open,"
In terms of the split of call centres in
South Africa, Data Monitor says that the Western Cape's 32%
of the total in 2003 is going to increase to 37% by 2008,
whereas it sees the share of Gauteng reducing from 61% to
Last year, funding for Callingthe-Cape from
the city and the provincial government increased by 600% on
Although it is not expected to grow by that
margin this year, Mills hopes that funding will increase by
30% to 50% this year.
The money is used for marketing, operational
expenses and research.
"Our primary role is to see that the
industry grows and that job opportunities are created, but
we also want to see that new companies are developing and
black entrepreneurs are given a chance to succeed," says
This year, the company is doing a big research
project to determine what persuades companies to outsource
and, in particular, profile the types of com-panies that are
likely to outsource to black suppliers and do preliminary
research and marketing into those companies.
"We will then be able to give that research
to our black economic-em-powerment companies," says Mills.
Of the 32 local outsourcing com-panies in
the Western Cape, eight are black-owned and 50% have some
measure of black shareholding.
Mills points out that financial services
and other companies that have gone through the ICT charter
process and now have procurement targets that they need to
hit for their scorecard can outsource part of their telemarketing
or customer services to a black call centre.
"I don't think companies are aware that
they can source from black suppliers in this industry, and
we would certainly suggest that any companies that are interested
in that get in touch with us so that we can point them in
the right direction," he says.
There are still some significant obstacles
to the formation of new black-owned companies in the sector,
the main one being access to finance.
"The early-stage companies battle to
raise money, even though they are competing head-on with competitive
international markets and they are winning business,"
"It is a shame that the local financial
community has not spotted the opportunity because they could
make a lot of money in this industry."
CallingtheCape is in the process of appointing
consultants to assist with business development and raising
finance for young companies.
During 2004, CallingtheCape implemented a
number of pilot training programmes.
This included assisting 60 learners into
the commercial workplace through its cadet programme, supporting
a programme through which 65 Afrikaans-speaking black students
learned Dutch and reaching 10 000 young learners through a
schools outreach programme.
Through this, the company gained an understanding
of what the challenges are in training people who are not
likely to get jobs on their own and released a draft strategy
for a new skills-training initiative, which will see it working
in partnership with the provincial government, the Smart City
programme, further education and training institutions and
the private sector.
The core curriculum is based on the National
Qualifications Framework level 2 that the Services Sector
Education and Training Authority (Seta) administers, but also
included are a number of other elements, such as life-skills
training, foundational training, information technology skills,
call-centre simulation products, accent training and practical
experience in call centres.
"At the moment, we are working out how
to manage the programme and also how to fund it, and are looking
for private- and public-sector contri-butions for training,"
"One of the issues we have in the industry
is that the services Seta, under which the call-centre industry
falls, has reached its target in terms of learnerships and
there isn't any more money available for call-centre learnerships."
Call centres ‘can employ 100000’
UP TO 100 000 new jobs could be created in
the outsourcing market if government, industry and labour
make a concerted effort to polish SA’s international
image, says a McKinsey survey issued yesterday.
So many foreign companies are outsourcing
business processes or placing call centres offshore that SA
has a golden opportunity to grab a slice of the market.
But government must provide tax incentives,
unions must allow workers to run round-the-clock centres,
and the private sector must fund heavy investment in training,
say analysts at McKinsey.
If that happens, the sector could attract $90m to $175m in
foreign investment and boost economic growth, the report says.
Research highlighting the huge potential
for SA to win foreign outsourcing deals is nothing new.
The difference this time is that the report
will be used by the Business Trust, a body dedicated to job
creation, to draft a blueprint to turn opportunities into
“SA has an extraordinary opportunity
for 100 000 more people to be employed over the next five
years,” said Business Trust CE Brian Whittaker.
A blueprint being prepared for the trade
and industry department would propose tax incentives and programmes
for training matriculants, and pressure had to be applied
for telecoms costs to fall.
SA’s competitive advantage lay in handling
processes for the financial services market, Whittaker said.