BPO firms suffer from Telco price wars

New Delhi: Telecom companies' new schemes like 'one paisa per second' billing and many others are squeezing the margins of their business process outsourcing partners.

Telecom companies outsource work on customer service (voice) and some back-office operations. BPOs get 70 percent of their revenue from voice alone. However, Indian telecom companies are witnessing a dip in volumes and calls due to the pricing and other wars for customer share in an already crowded market. Analysts say the dips in calls are because of the way schemes are structured. For instance, many firms provide a SIM card free or allow you to create a special group for low talk-time. A majority of users have at least two to three SIM cards. "Callers just use those SIMs for a particular service. That, in turn, impacts the volumes."

The companies are now asking their BPO partners for price reductions of 9-15 percent to protect their own margins. This is forcing BPO firms to change their delivery models. Hinduja Global Solutions and Aditya Birla Minacs are moving to tier-3 and tier-4 cities. ABM's Godbole says their strategy works on a hub-and-spoke distributed delivery model. Partha Sarkar, CEO Hinduja Global Solutions sais, "The hub, located out of a Tier-2 city, has 800-1,000 seats and handles 20-25 per cent of volumes across various telcos. The rest of the volume is distributed among the six to seven spokes, the seat capacity in each around 200."

He also said, "We are reducing volume from tier-1 cities and increasing these from tier-3. This immediately acts as a cost advantage and helps maintain our margins. We are also trying to see if we can consolidate common language capabilities like English and Hindi."
Source: IANS