India has been regularly "labeled" as the ultimate software offshore outsourcing destination. Advantage India has been expressed in terms of location, better adaptation to english language, cost, quality talented pool and a young population.

However, it seems that India is fast loosing the low cost advantage due to inflating salary bills in IT industry. India is leading in terms of attrition and salary hikes. It is inevitable in a growing economy, but the question is – how long can we sustain this? I know of several software service companies where there is an annual increase of 40-50% (on the lower side) in salary bills. There is not a very high increase in skill level of the professionals either.

So what is the end result?

A declining profit curve (read it right – profit per person / per month)! It might not be immediately visible due to growing "net profit" which is increasing since all the companies are in a mad rush to hire as many professionals as they can to keep "up" their net profit by working in volumes as profit per person dips.

But this is definitely going to make the dent. And it is already visible in patches! Check out how a company decided to move to US to save money on his operational cost! 

I have spoken to some HR managers about their "suggested" solution for this situation. In general I have heard of these two workarounds -

1. Moving up the value chain

2. Averaging of salary

Option 1, is most attractive. However it is not very easy for a company to move from an "outsourcing" business to a "consulting" business which is the next logical step in the value chain. It not only requires physical presence (unless someone comes up with an innovative way to do it online). But if any company can do it, nothing like that!

Option 2, is what most companies are doing. They hire a top professional and then make up for the high salaries by hiring several junior professionals to balance out the spike in salary and get an average salary which is profitable to them. This works and will work, as long as the company keeps expanding. But it has a limitation in terms of "critical mass" where it will no longer be feasible and the balancing act will become so complicated that it is bound to result in a miss. The worst thing is that a miss at that "critical mass" will result nothing but disaster.

At this point there is no "silver bullet" solution for this problem. However this is for sure that India will not remain an attractive destination for outsourcing for low cost labor for long. Either it will loose its edge to emerging low cost economies or it will reinvent itself as an economy which is higher up the value chain.

Only time will tell, which way things go!

Entrepreneurship knows no barriers!

Last year while searching for an office in Annanagar area of Chennai, I came across an entrepreneur who is remarkably different and inspiring. He reaffirmed my belief that entrepreneurship does not need boardrooms, stylish presentations and big venture capitalist to become successful.

I met this guy who runs an auto (three-wheeler taxi). He has put up "clear and consistent" advertising inside his auto and in the Annanagar area that he can arrange for rented premises. When he receive a call he is quick to react. He behaves in a very courteous manner and show you properties which exactly match you specification.

To add to this, one do not need to spend a penny on transportation as he will take you around free of cost in his three-wheeler to show selected properties.

I took some photographs of this person who found out how he can improve his own life and of others (people he serve) including his employee (Oh yes! I saw that he also employ a person now). He deserves to earn many times more than most three-wheeler taxis, because he has improvised.

Note: The guy sitting inside the auto is the boss! The bald guy is his agent / employee!

Few lessons that we can learn from him:

1. He primarily operate within a geographical limit. Thus he can get first-hand information on the properties vacant and possible tenants in that area.

2. He has used cross-selling on steroids. A person sitting in this three-wheeler gets a ride and pays for. If he is interested in renting out his property or taking a property on rent, he will immediately get contacts without any additional expense.

3. He knows what his customer exactly wants. He was right on target. I thin the reason was – He listened.

My best wishes to this gentleman and I hope to see him doing better everyday!

Yesterday, I was attending an interactive session with Mr. Vinod Dham (Yes! the same guy who invented Pentium chip and Flash memory).

It started with a nice inspiring story – How Vinod accidentally stumbled into engineering and ended up building the fastest processor in his time. He shared with us – How he got into his second career as a management expert and further diversified into venture capital business, which needs a totally different skill set and mind frame compared to a pro engineer.

During the entire informal discussion he held with various TiE – Kolkata members and IIM – Kolkata students, he shared his insights about the IT industry and role / challenges India seem to play in this new evolving eco-system.

He quoted a businessman whom he met during his visit to Chennai few years back:

"Revenue is Vanity, Profit is Sanity, Cash-in-pocket is Reality"

The emphasis was on building profitable business, keeping the fundamentals in mind and making sure that the business should generate positive cash flow and profits to stay in business. Many companies forget this fundamental law in the blind run to "make it big".

Business starts sinking when-
- market valuation takes a priority over the value that you are adding to the consumers
- turnover starts taking a priority over profitability
- projection/paperwork starts taking priority over cash-in-hand

It reminded me the most influencial interactive session I had with Mr. Ajai Chowdhury, Co-Founder of HCL Infosystems (again in a TiE event) where he emphasized on the importance of being street-smart and how cash flow defines the destiny of the business more than anything else.

His tip, always help me keep things in check. I hope it does the same for the aspirants of the renewed dotcom craze!

Take care.

A lot has been talked about call center outsourcing.

We have heard and seen how it is changing the lifestyle statement for the young Indians who are now earning a handsome salary and (many of them) living a bohemian lifestyle!

On the other hand there have been voices against it for reasons ranging from cultural differences, inappropriate implementation and job losses.

It is nothing less than a "boom", similar to that we have seen in the dot-com era. And yes, a "bust" is inevitable. I am not drawing an analogy between sunrise-sunset and boom-bust. But, the reason is more deep rooted.

The model of call center outsourcing needs unprecedented changes in socio cultural changes which cannot take place at a pace businesses expect. This is a fact – even if it brings a sigh of relief or sounds very depressing.

Let us consider the situation at both the ends:-

Hundreds of companies from USA and Europe are outsourcing inbound and outbound call center operations to operators in India. Most of these operators hire young graduates (and sometimes even undergraduates) at attractive pay scale and train them. They are trained in western culture, accent and lifestyle (by showing them TV serials).

Let us see their priorities in brief:-

• Money (live life king size)
• Entertainment
• Friends
• Career!

Yes, the last one was "career". I have spoken to many call center executives and very few of them consider the current job to be their goal. They understand that their current job does not have enough scope to add value and they need to move up the value chain to make an alternate successful career.

They care about the satisfaction of the person at the other end of the phone line because their job depends on that. It is not a passion! Besides in many cases, even if they want to solve a problem or answer a question, they are unable to do so, since they do not know what should be their reaction in the given situation. The cultural difference is clearly visible when they communicate with the person at the other end.

Now, let us examine what happens at the other end -

A normal call center employee in USA/ Europe will be middle-aged (around 35 or so). He is a graduate (even if he is not a graduate, he is knowledgeable about the subject or have received enough training) and working in a call center for a career. His priorities in life are very different -

• Family
• Career (A stable, safe job)
• Money (House, Car, Mortgage, if any)
• A decent lifestyle

So the priorities are very different here. Therefore the attitude towards work has to be different and much more serious.

This clearly makes a cause of better quality call handling by a person who is from the same cultural background (as much as possible).

So what are we going to see in days to come? 

1. Call center outsourcing will go down over the next decade. It may not dip immediately, because the problems are not surfacing and even if it is surfacing the cost difference is making the manager turn a blind eye towards the same.

This cost difference will thin down as the Indian economy picks up and per capita spending increases, resulting in further surge of salaries.

2. Call center outsourcing will be selective! People will realize that only "certain type" of communications can be outsourced and managed.

3. Several call centers will find it impossible to meet up to the quality expectation of their clients and may go out of business.

4. Selected call centers will retain their hold by focusing on those selective areas which are feasible for outsourcing. They will have excellent quality process in place and will offer call center jobs as a definite career option. We might even see hiring of middle aged professionals in call centers at that time to bring in further stability.

This consolidation is inevitable. It has happened in the "medical transcription" industry and the generic call centers seem to follow the same route in long run.

5. US/European countries may bring up a special "Do not call" list for people who do not want to be called by overseas call centers to stop the menace of unwanted sales calls. We may even see a blanket ban on outbound call center (making sales call)!

6. Company owned call centers will continue to operate in selective areas.

Conclusion 

We know that the bubble will burst. It is just a matter of time. And I really hope that this time it does not take the industry in the state of despair that the dot-com bust did. It is unlikely because now we have much more business than staring at the hoardings with some silly dot-com imprinted on it.

Disclaimer

My comments and analysis of the industry, people profile and their goals are a generalist view I have gathered during my interaction with several people. They are entirely based on my experience and I totally understand that they may be incorrect or wrong or may not apply to a certain segment of people.

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