Wednesday, October 24, 2007

Offshore - why I would go for South Africa over India

From previous posts you might have concluded that I'm against offshoring.

I'm not.

What I am very against is the offshoring school of thought that is 'your mess for less' or just aims to reduce all service levels to an absolute minimum. To me this misses the point that offshoring provides many opportunities to do far more than reduce cost.

My feeling (and it's only an impression) is that at least for the UK market, India sold itself very successfully on cost. That was a successful strategy to win business, but ignoring service quality (or being too low cost to deliver it) has been bad for keeping the business. A YouGov survey earlier this year found that over half of UK respondents' biggest gripe was dealing with overseas call centres. It wasn't just xenophobia or an objection to offshore, it was that only 4% of respondents reported getting good service.

UK companies have begun to realise that while contact centre operating cost can be cut dramatically by going to India, that cost saving is nothing compared to the news cost to your brand reputation and the cost of increased customer churn. It also can allow your competitors to gain market share at your expense (see Nat West bank's advertisements stressing their UK call centres) and the examples of companies like Powergen which last year closed its Indian operations and brought them back to the UK specifically because of customer service.

By contrast, South Africa (from what I have seen) has approached the market very differently. I was impressed with what I saw at the UK's Call Centre Expo a few weeks ago where the focus was on stressing South Africa's better service levels, native English, shared timezone to the UK and developed infrastructure. The infrastructure is an important point, particularly the IT infrastructure. Large South African firms like Old Mutual, Anglo-American and Telecom SA have all run sizeable IT operations and although skills are not in oversupply most technology skills are available. The local economy is also sufficiently advanced for there to be significant call centres serving the local market. Crucially this means that South Africa can look at providing more than just first line customer support and take on technical support, internal IT support and elements of back-office processes. Cost reduction is a key part of the value proposition to UK organisations (have a look at Cape Province's figures and references) but it is cost in relation to the higher value of the work that can be taken on. Similarly in Gauteng, IBM have grown substantially providing these type of service to European clients and Dimension Data also run substantial operations under the banner of their Merchants subsidiary.

Encouragingly, I don't think South Africa represents a large threat to UK call centre market and may well ending up complimenting it. I suspect we're likely to see processes split between countries with parts of work being handled onshore and parts going to South Africa.

Of course that requires companies to be able to manage data and voice traffic seemlessly across continents, and that's where Cisco has some very good technology. We have a number of customers using technology like our ICM product to deliver virtualised call centres across national borders and this seems to be a trend that is increasing. You can also get a good graphic of ICM in action here. There is a clear trend in multinational companies that if you are going to manage customer service properly, you should do it with all parts of your enterprise, regardless of where they are located and do it well. The capability exists to do it anywhere, but that decision should not be driven by cost alone.

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