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The Characteristics
The telecom industry has taken the lead in outsourcing. While most telecom players did outsource regionally from 1998-99 onward, Bharti took a major step of consolidating by announcing large outsourcing deals with some of the offshore players that in a way also marked the entry of offshore players into the domestic market. Since then, almost all major playersBSNL, Vodafone, Idea, and Spicehave outsourced their call center services. Tata Teleservices has outsourced to a group-owned company while Reliance has kept it with a subsidiary.

Banking & Financethe top outsourcer when it comes to IThas by and large kept the customer service work in-house but outsourced the outbound telemarketing work. The private insurance industry, in fact, has outsourced a lot of telesales, and SMS-generated query handling to third party service providers. Despite being a fairly nascent industry, insurance players find mention among customers of almost all major players.

While every company does classify its services to verticals and horizontals, a few realities stand out. In telecom, for example, it is largely inbound customer service. For banking/credit card and insurance, it is a mix of cold calling, sales query handling or loyalty sellingall related to sales. These two together constitute close to 80% of the revenues of the organized industry. Travel, consumer care, and retail are emerging as the new opportunities. Among horizontals, services such as collections and tech support are very small; the healthcare industry is emerging as a major user but the third party administrators (TPAs) in insurance usually run their own call centers.

Some companies are, of course, trying to exploit the latent opportunities for customer care in FMCG and consumer durable industry but that is still a very small segment as of today.

The Metrics
The domestic industry is still very, very nascent and many of the metrics are still evolving. Here are a few.

Billing rates: The billing rates are almost always on per person per day basis for inbound work and a mix of per day per person and incentive for the telesales work. Today, the average realization per person is anywhere between Rs 15,000 to Rs 22,000 per person per month for the outsourced industry.

Margins: Margins too vary a lot between types of services and types of players, and ranges between 5-6% to 20-22%. In the organized industry, the average is around 15-16%that is, of course, lower than the offshore margins but is fairly comparable. With companies moving to smaller locations, that is likely to move up a bit.

Salary levels: The starting salary of course depend more on the location than on anything else. While the range is between Rs 4,000 on the lower side to Rs. 7,500 on the higher side, Rs 6,000 for tier-1 cities and Rs 4,500 for smaller locations is the average entry salary.

Profile of agents: Most domestic contact centers look out for people who are clear in communication with good, if not excellent English. Unlike international call centers, knowledge of another Indian language is almost a must. In places like Bangalore, some companies even look for people with three language skills.

The Road Ahead
While telecom, travel, and BFSI remain the immediate opportunities, retail, hospitality and healthcare are the immediate areas for which almost every company has a plan of action. There is a divide of opinion regarding the opportunities in the packaged goods and white goods sector. While a few take a wait-and-watch policy, a few others are putting all their energy to develop these segments, expecting an early mover advantage for them. Apart from SerwizSol and InfoVision, Delhi-based IBS, a regional player, is betting on this segment. Government and citizen services remain a big potential but few would like to describe it as an opportunity. Yet, some companies like vCustomer, Omnia, and Spanco are seriously targeting this space. We do not expect too much momentum in this space this year (2007-08) or the next, but going forward, it would be huge. Also, the ability to sign Bharat BPO like revenue sharing contracts would be a great step forward in this sector.

But more than the verticals and horizontals targeted, it is how this industry is behaving that differentiates itself from any other industry in its infancy. The outsourced domestic contact center industry in India at Rs 1,600 croreeven with its projected 65% growthis very small, but thanks to its world-class experience, it is creating a framework keeping in mind the big opportunity that is likely to emerge from the big consumer boom.

There are two distinct trends that we expect to see in the next couple of years. And for those who follow the offshore industry, it is a fairly familiar story.

One, a lot of focus will go to attracting, retaining, and developing manpower, as the market enters a phase when players need rapid scaling up. The industry has the advantage of learning from the offshore experience. They are already showing maturity by moving to smaller locations like Durgapur, Puducherry, and Indore. Aegis has also started a program for developing middle level managers, called ACEAchieving Continuous Excellence. A lot of debate and discussion in the next few months will be around that.

The other is, of course, consolidation. There are quite a few regionally focused playerssuch as InTouch in Delhi, JSS Consultancy in Bhubaneswar, and IBS in Delhi. Many of them have 500-plus people. They will need capital to grow. Expect a large-scale consolidation, especially involving the regional players. A few like Aegis and Intelenet already have those plans. We expect many offshore players to take the inorganic route to grow the domestic market.

In short, the market is still evolving but taking some really mature steps to minimize, if not eliminate, growth pangs. Any new market is new and, hence, can always throw up new challenges. But then, opportunities and challenges go hand in hand. Call it the beginning of a rupee dream or the next big thing. It is here to stay.

Shyamanuja Das and Shikha Das
shyamanujad@cybermedia.co.in

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