Double blow for BPO industry

Audra Mahlong
By Audra Mahlong, senior journalist
Johannesburg, 04 Mar 2010

The electricity price hikes and the failure of telecoms operators to provide reduced tariffs will be a blow to the local business process outsourcing (BPO) industry, as it struggles to keep costs low, says Frost & Sullivan.

Frost & Sullivan analyst Birgitta Cederstrom says government has failed to successfully implement strategies that would build SA as a low-cost destination.

“Five or seven years ago the message from government was that we are a low-cost destination. That has never really been the case,” she says.

Cederstrom adds that SA has failed to compete with other low-cost destinations, such as India, and was recently overtaken by emerging eastern European markets such as Romania and Russia.

Tax incentives, which would decrease the cost of operations and encourage new entrants into the market, have never materialised.

Denis Smit, MD of BMI-TechKnowledge, says the current economic cycle has put “incredible pressure on call centre rates”.

“Anything that increases the cost of running services from SA and leads to smaller margins will be a stumbling block,” says Cederstrom.

Not just Telkom

While the BPO industry has continually called on Telkom to offer reduced rates, the state-owned enterprise states that no reduced tariffs had been offered to the BPO sector.

Cederstrom, however, notes that the entry of new telecoms providers to the call centre industry has lifted the responsibility on Telkom to reduce tariffs.

Smit says other telecoms operators have already got significant call centre clients and have changed the landscape for the BPO sector.

“We have to stop looking just at Telkom. Telkom was a monopoly, but it is no longer one,” Cederstrom points out.

Other service providers, such as Vodacom, MTN and Neotel, should also be called on to contribute to reduced telecoms prices for the industry, she notes. Cederstrom adds that there needs to be discussions with all stakeholders and less pressure must be put on the industry to unilaterally introduce reduced tariffs.

Focus on quality

Cederstrom notes that the BPO sector is a top priority and should continue to be highlighted by government. She adds that it is a good initiative and will help SA gain strong global appeal, but notes that strategies to promote the sector need to evolve.

Government should promote quality delivery and the capabilities we have, says Cederstrom. Industries, such as the financial services, telecoms and retail, which have good success rates, should be promoted from a quality perspective, she comments.

“The government should not even try to send the message that we are a low-cost destination, they [should send the message that] we are quality. We are not the cheapest destination, but we are a mature market and we should not be seen as cheap, but rather that we can deliver,” says Cederstrom.