Is the Australian call centre outsourcing industry dying?
Are high salary costs, low margins and technology making it too hard to be an independent provider?
The rhetorical question was posed by industry veteran Ian Aitchison CEO of COPC this week. Aitchison has been around the Australian call centre industry for a long time and has seen the good and the bad times.
The Australian call centre industry was badly battered by the Do Not Call legislation a few years back and it put many outsourcing firms out of business due to extra compliance costs on top of very skinny margins.
Its no secret that the global voice market is in decline, Australians are increasingly using free apps to send text, picture and video messages and make calls – with savings over $100 in value a month for heavy texters – raising the question of whether telcos are becoming merely a “conduit” for smartphone makers and app designers. Who these days wants to talk to a call centre agent and risk getting stuck in an annoying IVR queue, when one can jump online via a host of gateway devices and do ones business and move on? I have just returned from the International Outsourcing Summit in the Philippines and the alarm bells were ringing over there as the industry tries to figure out how to reinvent itself and not become overly reliant on front office voice work.
Rolf Hansen, CEO of low-cost telco carrier Amasim, said heavy texters sent about 500 texts a month or more and at an average rate of 25c a text, that worked out to $125. He said switching to free apps could save 95 per cent of this cost.
“You can’t stop technology and if consumers see benefits they will embrace them, full stop… As we can’t stop it we’re just trying to come up with smart data products that people will use to bypass some of the legacy products [like SMS],” he said.
“Over time what we’re seeing is that these kind of very-high-margin telco services are progressively disappearing, progressively eroding,” says Nick Ingelbrecht, research director for Gartner.
Aitchison suggests that Australia is not an easy place to make money as a call centre provider: “A number of local firms have been swallowed up or merged in the last few years, with some imploding spectacularly. Even established global giants just couldn’t make a viable business here”.
Another industry veteran, FooBoo’s Peter Springett, tends to agree with Aitchison’s sentiments: “Unfortunately, I feel he may be right. I talk with senior executives, management and owners of Australian-based contact centres and BPO companies every day of the week and most seem to be finding it very tough.”
Even though the BPO world is starting to move beyond the lift and shift nature of BPO 1.0 the long tail of the industry is being mopped up.
Springett puts it down to basic economics: “On one hand most Australia-based contact centre businesses are having to charge their clients between A$48 and A$55 per agent/FTE hour, just to keep their heads above water. This rate is due to the high labour cost, high employment ‘on-costs’, demanding employment regulations, need for shareholders return on investment and the difficulty in finding and retaining good quality staff in Australia.”
He goes on to say, “On the other hand they are under continual competitive threat from modern, highly sophisticated BPO/contact centre vendors from countries such as the Philippines, who offer a much lower pricing model and university educated, tech-savvy, highly motivated staff with business-grade English language skills, and they provide a good all round 24/7 service.”
Springett also points to the fragmented nature of the Australian call centre and outsourcing sector: “These offshore BPO/contact centre businesses are strongly supported by their respective governments and industry associations e.g. BPA/P. Perhaps it’s time for the Australian contact centre vendors to work closer with the Australian government and the various Australia-based industry associations, to find an answer…before it is too late!”
The Australian call centre (captive) market is worth about A$18 Billion and employees about 200,000 people. The Philippines has about 600,000 seats, 17,000 of which service Australia.