http://www.express-computer.com/20040119/newsanalysis05.shtml
Hyderabad's ITeS sector grows despite problems
Peering behind the PR, Srinivasa Rao Dasari finds out that Cyberabad
is not without its problems—for instance, the US Do Not Call list has
created some damage. But the good news is that corporates and the
state government are acting on the problems
The call centre business in Andhra Pradesh is now getting over the
initial hype and seeing a more realistic picture of market dynamics.
With exports at Rs 1,411 crore, the total contribution of call
centres/ITeS services to the state's IT exports basket was about 39
percent in 2002-03. For the current fiscal, it is expected to touch Rs
2,000 crore.
Communication woes
Since the hi-tech city is a non-gateway city, it makes the cost of
communication expensive for BPO operations when compared to states
like Maharashtra and Tamil Nadu. "Because Hyderabad doesn't have an
international gateway, call centres have to shell out additional loop
charges apart from international calls. In India there are three
submarine gateways located at Mumbai, Chennai and Kochi. Calls made
from Hyderabad are routed either through Mumbai or Chennai. The cost
of communication is around 7-10 percent," Shakthi Sagar, the president
of the Hyderabad Software Exporters Association (HYSEA) told Express
Computer.
Adds Vijay Kumar, director, Software Technology Parks of
India-Hyderabad (STPI-H), "Hyderabad already has satellite gateways
facilities; now we need to establish a fibre gateway from Vizag to
Singapore, which two or three agencies—including the state
government—are already contemplating. It is a project costing roughly
a billion dollars, and involves 3,000 kms of undersea cable and about
18 months of time to build it. But the incremental telecom cost at
Hyderabad due to the national long distance (NLD) component is
nullified by several other advantages that Hyderabad has got over the
other cities."
With international call charges and bandwidth costs moving south, some
industry players don't see this as a major hurdle for growth. In
recent times, the charges for a 512 Kbps line per annum have come down
to Rs 52 lakh from Rs 84 lakh, while loop charges remain at Rs 5 lakh.
"The cost of communication is higher not just in Hyderabad but in all
cities other than Mumbai and Kochi. My guess is that the differential
is around 15 percent or so. The latest I heard from vendors is that
they are trying to bring down this differential in costing. Any
decision to start a call centre depends on multiple factors such as
cost of infrastructure and bandwidth, resource availability,
connectivity from the travel perspective, etc. Hence, communication
cost alone will not have a major impact on the choice of location
while setting up a call centre. We use both fibre (undersea cable) and
satellite connectivity," said Bipin Chandradath, vice-president of
Knoah Solutions.
Meanwhile, major MNCs and domestic players operating in Hyderabad have
been going ahead with their expansion plans in the BPO segment. "As
long as we maintain quality and timely delivery, there won't be any
setback. We are investing a lot in infrastructure facilities and HRD
activities, and are getting good results," a source at an MNC BPO firm
comments.
Attrition
With the increasing opportunities in this segment, the attrition ratio
is about 45-50 percent, which results in high overhead costs for
companies. But on the other side supply is also increasing, and this
glut may result in steep cuts in salaries for call centre agents and
process employees. According to industry expectations, entry-level
salaries will come down to Rs 4,500-5,000 from the present level of
Rs 6,500. If this doesn't take place, pay hikes will not be as
frequent as they were in the past, and experienced pros will not be an
exception to this. "We are investing a lot in training manpower right
from recruitment advertisements and consultancy spending. If the
attrition ratio is higher, our training cost will also flare up.
Hyderabad is a favoured destination for the IT sector, but quality
manpower and the attitude of sticking for a longer period will also be
equally important," says Durgesh Malepati, general manager, technical,
Northgate BPO Services.
Do not call
But what's more alarming is that since October 1 of last year, when
the US Do Not Call (DNC) list came into existence, there has been some
disruption in the call centre business. It is estimated that about 10
companies logged out of the business owing to non-feasibility of the
outbound call centre business model. The outbound business model is
typically performance-based.
"Following a failure to maintain optimum levels of performance, many
sales-based processing companies in the Hyderabad ITeS sector are
downing shutters. Many of the companies shutting down are 50- to
100-seater centres, and includ Venus Cyber Tech, IndusBusiness, etc,"
said a source in a major call centre.
Usually, call centres get outbound business on a two to three year
contract basis, but with the effect of US DNC list, almost all these
contracts have ceased to exist. In the new regime, the client provides
the call centre with a list of phone numbers that are not part of the
DNC list. However, since the DNC list consists of around 50 million
telephone subscribers, and since numbers matter a lot in any
marketing-related business, there are not enough numbers available now
for the call centres to show results. For instance, only 50
respondents out of 1,000 calls dialled turn out to be prospective
business calls. As result of this, the volume of business has come
down.
According to sources, currently only three outbound call centres are
still continuing their business. In order to sustain their business
ventures, some sales-based processing call centres are now exploring
the chances of broadening their horizons in this segment. With ready
infrastructure in place and skilled manpower available, these centres
are trying to get business contracts for claims processing, billing
claims, etc.
"Prior to the DNC list, the business model of outbound call centres
looked attractive. Sales-based processing call centres would get $8-14
per hour for making calls and when a sale was executed they got an
additional amount of $25-75 per successful deal. Call centres that
invested on building infrastructure are now exploring new business
verticals in this segment, such as insurance and banking, etc," said
Durgesh Malepati, GM (technical) of Northgate BPO.
Finally
The state has about 50 large and medium call centres working in
sectors such as banking, insurance, financial services and health. All
captive centres are doing well and expanding. Among third-party
vendors, other than Knoah, there is only one other player in the
health insurance sector with a consistent performance. The BPO
business currently employs more than 25,000 people in the state.
Some companies are also considering a revamp of their business plans
since processes like GIS-based mapping and credit card support have
not worked out as anticipated. These companies are thinking of pulling
out of some operations or relocating to other places in Haryana
(Gurgaon) or Maharashtra, developments that are not likely to bring
much cheer to the state's call centre employees in 2004. There is
already some disquiet among them due to agreements between companies
not to poach employees from each other.
But Shakthi Sagar has the last word: "The AP Shops and Establishments
Act modification and The Data Protection Act will boost the confidence
of foreign customers and at the same time enlarge the scope of
business opportunities. We have a good IPR system in the country,
which will also strengthen their confidence."
dsr@expresscomputeronline.com
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