Technology, Internet Services, BPO, Call-Center Honeymoon in India about to turn sour?

Call CenterYou don’t have to be a rocket surgeon to know that India is the place where many jobs are bangalored and thus India have been earning huge international investment in the past few years. However, it seem to have reached a stagnation point. Study revealed that the attrition rate have reached around 50%. The salary of the BPO, Call-Center workers have increased tremendously because there is a huge demand. One company is buying out employees from another and vice versa. The demand for skilled workforce in this sector is not being met by enough supply.

The US-like environment, the Pizza culture, the f$#ked up slangs and everything else that happen in the 5 feet wide cubicles (sometimes smaller) – marriage liaisons, quote of the day, new year resolutions, celebrity gossips – is unable to retain employees for long; they will defect to another higher paying job. These skilled workforce will leave for any reason they can come up with – “I’m just bored”, “the working hour is long”, “I like the UK shift more than the US shift”, “I’m missing a social life”, “I don’t like the food”, “I don’t like the dress code of my co-worker”.

The main weapon that they have is the high paying job being offered to them by another company next door. The skilled workforce works in such environment for the high paying salary, perks and the lavish life they can enjoy through that income. It is not surprising that many an Engineers have become Call-Center experts. You might wonder why an Electrical Engineer should be making marketing phone call to an American selling Honeymoon Holiday Packages! Well, they’re paid very well and would not mind becoming Tom, Harry, Johnson, Smith, Julie, Joan, Eva; the list can go on and on.

India is a land of superstition, religion, parents and family knitted social fabric. Obviously, parents, spouses and g/b friends of call-center worker hate the overnight culture but they are ready to compromise as long as they bring in that fat salary. So, it is money all along the way.

India started with a cost which is just about 15% to 20% of the International/US cost. Judging from the current rise in salary demands, it won’t be long before it hits the 50% mark. When it crosses that line, outsourcing firms and investors will re-think. Why should it be outsourced to India when it can be done in Canada at about 70% to 75% cost or in Mexico at about 50% cost; moreover, there is the advantage of similar time-zone and culture balance. Thus, India need to maintain that ~ 20% to 25% cost against the International market to really keep going. And how can we do that, we have to start right from the root level.

I don’t want to act like I know lots about the Finance and Economic part of the equation but it is very clear that at the current inflation rate and the Rupee value against the Dollar, the Honeymoon won’t last long. Even though India make lots of foreign income, for the last 2 to 3 years, the Rupee to Dollar ratio have remained more or less constant and it not really appreciating. At that rate, in about 2-3 years from now, by around 2009 end, it will start to show the scary picture. It might not be that devastating as the DotCom Blast in the US but it won’t be better either, by 2010, Indian ITES will see the ugly acme all around.

School, High Schools should introduce Courses on BPO, IT enabled Services, Call Center Training

There are no schools, high school or colleges that offer any of these course that can lead to direct employment and skill manpower generation. If India is growing at the rate of 9% through the IT, ITES - Call Centers, BPOs; why not invest in watering the source, making more skill manpower at the root level. Why not introduces related courses right at the grass root; for instance if there is a one year elective or optional course in Colleges, one would be able to work in the BPO industry without going through the training, and private aided courses. Even if one need to be trained, it will be like introducing a person to a particular setup of an organization.

Touch Typing Courses should be compulsory in schools

Computers is and will be an integral part of our lives; it is a means to most of our ends. Many schools, high schools and colleges have Computer related courses in one way or the other. Isn’t it about time that the very basic of proper Touch Typing on the Computer Keyboard be a fundamental and primary course? Will it not be such an immense help to anybody who want to type something? It is funny that many a programmers do not touch type and are index finger happy.

Ok, that is more than enough said about India’s BPO, Call-Center rise and fall. Adding fuel to this is the unpalatable Budget 2007 from the Indian Finance Minister – P. Chidambaram, specially for those of us in the Internet Technology realm. Here are some that will irk and freak the techies out –

  • The 2007-2008 Budget have Fringe Benefit Tax (FBT) to Employee Stock Options (ESOPs). This will eventually make it harder for companies to lure employees with stock options as a viable employment/retainment perk. This will add up to the cost and potential uncertainty.
  • I’m not sure of the actual figures but it states that for those earning Rs. 1,000,000 and above per annum will have to pay more tax, even more than some companies.
  • The Finance Minister says that it gave lots of help to the IT industry for the past 2 to 3 years and is now growing at a tremendous rate . Now, it is time to take back from it and give to Agriculture. Thus stripping off many benefits from IT. Well, that’s it, it will get the step-kid treatment from now onwards.

For the lot other remaining part of the intricacies, I’m yet to understand all that.

UPDATES

2007 Mar 5 — The Department of Telecom (DoT) have directed ISPs to stop providing Internet services to Call-Centers and BPOs which are not registered with them. According to them, this was a move taken to clamp down on the illegal use of Internet Telephony. However, many industry experts feel that the Call-Centers and BPOs should be given enough time to rectify and an opportunity to appeal. If DoT’s directive is implemented, more than 2,000 Call-Centers in India would be closed which will render more than 50,000 workers out of job.

2006 Mar 19 — In the wake of the current Hewitt’s projections of a healthy pay increases in the fiscal year starting April, 2007, Global management consulting firm A.T. Kearney has rung alarm bells for India as the preferred destination for call centre and BPOs. The average wages for call centre and BPO workers in India, China and the Philippines have grown anywhere from 20 to 40 percent, which is very high as compared to similar wages in developed countries which rose by just 5 to 10 percent.

  • http://www.mehtanirav.com Nirav Mehta

    I agree with you that the problems has begun. I wrote on similar topic a while ago on my blog and there was a war on ethics in HR. The training at root level is a must and we need to find out ways to train entry level professionals.

    Hire salaries will kill the small time players initially, and then pose a big problem for the big ones.

    Equilibrium is coming in 8 years!

  • http://www.mehtanirav.com Nirav Mehta

    I agree with you that the problems has begun. I wrote on similar topic a while ago on my blog and there was a war on ethics in HR. The training at root level is a must and we need to find out ways to train entry level professionals.

    Hire salaries will kill the small time players initially, and then pose a big problem for the big ones.

    Equilibrium is coming in 8 years!

  • http://techmein.com Anand

    You were bingo on target, Brajeshwar. I see not just the ITES, but even IT services in India having a very small visible lifespan from hereon. All kinds of outsourcing jobs will start getting costlier, and I dont think this dream run will continue anytime after say 2015 odd..

    You have cited inflation as one reason for the increased pay. But, let me give you a counter instance. Take a city like Bangalore, the once sleepy little town. Even today, native Bangaloreans do not like their city having become the software hub simply because it has dramatically inflated the prices. The supply-demand gap between the s.w engineers implies that the existing people are paid lumpsome loads of cash. The subsequent disposable income means shops can now expect greater profits by charging more..., all while Bangaloreans apart from S/W engineers are still earnign the same peanuts. This way, they suffer inflation that is self-created.

  • http://techmein.com Anand

    You were bingo on target, Brajeshwar. I see not just the ITES, but even IT services in India having a very small visible lifespan from hereon. All kinds of outsourcing jobs will start getting costlier, and I dont think this dream run will continue anytime after say 2015 odd..

    You have cited inflation as one reason for the increased pay. But, let me give you a counter instance. Take a city like Bangalore, the once sleepy little town. Even today, native Bangaloreans do not like their city having become the software hub simply because it has dramatically inflated the prices. The supply-demand gap between the s.w engineers implies that the existing people are paid lumpsome loads of cash. The subsequent disposable income means shops can now expect greater profits by charging more..., all while Bangaloreans apart from S/W engineers are still earnign the same peanuts. This way, they suffer inflation that is self-created.

  • http://newsful.in/ Arup

    I agree, it is the cost advantage that is fueling the outsourcing not the skill that we possess. And with the hike in salary if that advantage is gone then the BPOs will have to suffer.
    PS: I submitted the story to newsful.in

  • Pingback: Technology, Internet Services, Call-Center in India about to turn sour? « Tons of Fresh News

  • http://newsful.in/ Arup

    I agree, it is the cost advantage that is fueling the outsourcing not the skill that we possess. And with the hike in salary if that advantage is gone then the BPOs will have to suffer.
    PS: I submitted the story to newsful.in

  • Aditya

    I disagree with your post. Costs in IT, ITES are going to drop in the next few years

    The reason is that there's going to be a huge surge in supply. Think of the 100s of thousands of "call center" engineers that are going to graduate over the next few years. All these are the people that joined these courses over the last few years since the pays started increasing.

    Also, you forget that India has a *very* large population. There will always be people willing to work for less. The current problem is only because of temporary supply constraints.

  • Aditya

    I disagree with your post. Costs in IT, ITES are going to drop in the next few years

    The reason is that there's going to be a huge surge in supply. Think of the 100s of thousands of "call center" engineers that are going to graduate over the next few years. All these are the people that joined these courses over the last few years since the pays started increasing.

    Also, you forget that India has a *very* large population. There will always be people willing to work for less. The current problem is only because of temporary supply constraints.

  • Rajeev Jain

    The average life of call centre employee is around 3 years, after which they move on to something else. The industry continously hires people straight out of college and salaries are still really really low. Do you really think that they get stock options and that the FBT and other recent tax changes will affect them? If yes, you're completely disconnected from reality.

    Also, don't forget the large population in tier-2 cities like Mysore and Hubli, just waiting to grab business from Bangalore. Many call centres have already diverted work away to Tumkur etc.

    The real estate cost is a major factor for this - not the lame reasons ("dress code" - come on, you have to be kidding me. Do you think anyone cares?) - that you quote.

  • Rajeev Jain

    The average life of call centre employee is around 3 years, after which they move on to something else. The industry continously hires people straight out of college and salaries are still really really low. Do you really think that they get stock options and that the FBT and other recent tax changes will affect them? If yes, you're completely disconnected from reality.

    Also, don't forget the large population in tier-2 cities like Mysore and Hubli, just waiting to grab business from Bangalore. Many call centres have already diverted work away to Tumkur etc.

    The real estate cost is a major factor for this - not the lame reasons ("dress code" - come on, you have to be kidding me. Do you think anyone cares?) - that you quote.

  • Augustine

    Look at the road traffic in India. You might take a lesson or 2 from it. It still moves on .India has a way to keep striving forward at all odds. The Industry and sytem will keep correcting itself but the population and educated population is so high that it will take another 5 decades before it comes close to stagnation.

  • Augustine

    Look at the road traffic in India. You might take a lesson or 2 from it. It still moves on .India has a way to keep striving forward at all odds. The Industry and sytem will keep correcting itself but the population and educated population is so high that it will take another 5 decades before it comes close to stagnation.

  • Pingback: India no longer attractive to Big IT Corps? - Brajeshwar

  • http://techblissonline.com Techblissonline Dot Com

    Just some thoughts on what some statements mean.
    Now, it is time to take back from it and give to Agriculture:
    Now, it is time to take back from it and buy agricultural lands in India and abroad in the name of all our (politicians) relatives.

    These skilled workforce will leave for any reason they can come up with - "I'm just bored", "the working hour is long", "I like the UK shift more than the US shift", "I'm missing a social life", "I don't like the food", "I don't like the dress code of my co-worker".

    A few more to add:
    "my boyfriend is working for that company", "my boss sucks", "they are are not promoting me even after spending 6 months in the job."

  • http://techblissonline.com Techblissonline Dot Com

    Just some thoughts on what some statements mean.
    Now, it is time to take back from it and give to Agriculture:
    Now, it is time to take back from it and buy agricultural lands in India and abroad in the name of all our (politicians) relatives.

    These skilled workforce will leave for any reason they can come up with - "I'm just bored", "the working hour is long", "I like the UK shift more than the US shift", "I'm missing a social life", "I don't like the food", "I don't like the dress code of my co-worker".

    A few more to add:
    "my boyfriend is working for that company", "my boss sucks", "they are are not promoting me even after spending 6 months in the job."