Mark Plakias and Bryan Mekechuk, analysts, Zelos Group

NewsBlast You just released two reports, one on the U.S. and the other on India. Why separate reports?

Bryan Mekechuk These reports are linked but cover very different markets. The Teleservices Databook is focused on teleservices in the U.S., and covers the entire gamut from agent-backed services, both inbound and outbound, to hosted speech and what we call Intelligent Notifications. The BPO report is focused on business process outsourcing in India. Business processes being outsourced in India include back-office functions such as accounting, in addition to call handling services.

NB Can you give us some highlights of the Teleservices study?

Mark Plakias The topline in North America for outsourced contact management, including multichannel apps like web chats, is $18 billion, and growing in single digits. However, when we segment the market and look at sales from hosted speech suppliers, and multichannel outbound notifications, we see high double-digit growth and some disruptive scenarios.

NB So are hosted speech providers taking business away from live agent shops?

MP Not so much really. It's more a case of call center management with legacy IVR equipment not wanting to reinvest in more equipment: the decision trees all point to outsourcing apps that are already automated to some extent. On the Intelligent Notifications side, we're seeing triple-digit growth in some cases as customers report great ROIs from shorter business cycles and inbound call suppression.  

NB How is your report on Business Process Outsourcing (BPO) relevant to our readers?

BM One of the major applications for telephony-based speech technologies is to replace conversations with live operators in call centers. Consequently, many of the value propositions for contact centers relates to reducing labor costs in call centers and increasing service levels for callers. With the feasibility of locating call centers offshore in low-cost countries, the value proposition for speech technologies needs to be positioned relative to lower cost offshore call centers, not higher cost domestic call centers. To illustrate, contact center agents in the U.S. earn cash compensation of approximately $25,000 per year ($11.36 per hour). On the other hand, contact center agents in India earn approximately 15 percent of that. Although there are other countries where BPO services are offered, this report is on India. The report contains a detailed full cost comparison that shows that the overall net cost savings through labor arbitrage with India is 31 percent. Thus, for many businesses, the 'competition' for automating call centers using speech technologies is simply sending those calls offshore. 

NB So are you saying that India presents a threat to sales of call center automation?

MP Not exactly, but one of the important recommendations that Bryan's report delivers to buyers of call center solutions is that the live agent cost benchmark that should be used in any ROI modeling is offshore, not the US - so that's 30 percent off the top of whatever speech vendors are using now in their live agent cost assumptions.

NB What was your biggest surprise in India?

BM Although I'd traveled extensively and been in some 35 call centers in 7 countries, I wasn't sure what to expect in India. Several people, including John McCready of Phonetic Systems who had been to India numerous times when he worked with Nortel, had done their best to prepare me for when I walked off the plane in Mumbai.  So I was ready for the lack of hygiene and the poverty, congestion, and pollution.  What I wasn't prepared for were the amazing capabilities available in India and the different world inside contact centers there. First, the agents in India are incredibly motivated to perform well and answer calls in the best way possible. As a developing country, people in India have limited opportunities so if they can get a job in a contact center they will do whatever it takes to be an excellent employee. This includes taking accent neutralization courses and adopting pseudonym names while they work during the night.   

Another surprise was the scale of the contact center operations in India.  Large call centers were in vogue in the U.S. in the early 1990s. As these large call centers became difficult to staff and manage, smaller networked call centers become the standard. India has huge contact centers that employ up to several thousand agents in each location. 

The cost structures are the opposite in India - high fixed costs and low variable costs (agent labor). Here in the U.S., the fixed costs are lower and the variable costs are higher. This spins the economics around.

NB Who are the reports written for?

MP These are written for anyone in the business of deploying customer service solutions. For buyers, this provides an objective view of an industry that really is in transition. For solutions providers, the North American market alone is over 150,000 seats of call center technology, and that's a huge opportunity for sales of everything from CRM software to CTI and next-gen IVR platforms. Since many of the larger outsourcing providers are publicly-traded companies, there's also value for current or potential investors in the sector.  

BM The BPO report is written specifically for potential buyers that are considering using offshore resources, whether in-house or outsourced. However, there is some valuable information for both sellers of speech technologies and U.S.-based service providers since they should know the alternatives to their products and services.

NB Closing thoughts?

MP It's an election year in a jobless-recovery economy. Automation and offshore outsourcing are bound to be high-profile issues for politicians on a national scale because they impact on the jobs issue. I think it behooves everybody in the industry to get smart on both topics.

More information on these reports is available at www.zelosgroup.com/tdb.asp and www.zelosgroup.com/bpo.asp.