South Africa India's outsourcing rival

Monday, 22 November 2004, 08:00 Hrs
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MUMBAI: South Africa may emerge as India's rival in business process outsourcing, thanks to its better infrastructure, low labour costs and cultural advantages.

The number of call centres in South Africa will double in four years, says a study, "South Africa: An emerging offshore location", conducted by Britain-based independent market analyst Datamonitor.

Offshore agent positions are also expected to quadruple from the current levels, says the report made available to IANS. Agent positions are terminals from which call centre operators make and receive telephone calls to internal or external customers. Multiple agents can use the same agent positions during varying shifts in a day.

"South Africa will occupy an important position in firms' global operations portfolios," says the report.

"It will slot in between near-shore locations such as Canada and Mexico, which offer close proximity and also cultural affinity (to the US), and more traditional offshore locations such as India and the Philippines that offer cheap labour."

The report says South Africa offers a higher quality, more culturally aligned front-office and back-office location where labour costs run at two-thirds of their US or British equivalent in the business process outsourcing (BPO) space.

Datamonitor expects there will be 939 call centres in South Africa by 2008 - almost double the current number of 494, registering a compound annual growth rate of 14 percent during the period.

The total number of agent positions is predicted to rise to 69,600 in the same period, according to the report. Currently, as many as 70 percent of South Africa's offshore customer service agents serve clients in the British market.

Most of these agent positions are located in the Gauteng province - more specifically, in Johannesburg. However, Datamonitor expects the balance will shift in favour of Cape Town in the Western Cape Province soon.

"South Africa is not as much of a labour arbitrage cost play when compared to India and the Philippines," says Ryan Powell, Datamonitor call centre analyst and author of the study.

"It, however, offers multilingual and non-English language agents that are better able to deliver more differentiated customer service based on greater empathy and closer cultural affinity," he says.

"These services are offered to customers in key target markets such as the US and European countries like Britain, Holland, Germany and France."

The Dutch market is expected to be the biggest non-English language market that is served from South Africa.

South African call centres are expected to provide higher quality customer service and sales services, with a particular focus on the financial services industry.

"The established call centre industry means middle managers already exist. Top-up training will bring those people up to suitable levels whereby they can best meet their offshore clients' requirements," says Powell.

"State-funded learner-ships are helping to fill the staffing pipeline to the industry for the longer-term needs," he adds.

The promised deregulation of the telecom market will bring about greater price competition, stimulating further demand for offshore operations in South Africa, said the study.

India's educational system and training programmes have helped transform the country into a global outsourcing superpower. The $2.6 billion business process outsourcing (BPO) industry in Asia's fourth largest economy has now become one of the top money-spinning ventures for the country and is set to grow at a dazzling clip in the years ahead.

More than a quarter of Fortune 500 companies like General Electric, American Express, British Airways, HSBC and Citibank have shifted their back office operations to India.

Source: IANS
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