The local business process outsourcing (BPO) sector is gearing up to take advantage of anticipated cost increases in India.
Research collated by Cape Town-based PixelFaerie shows that India's cost base is set to be 45% higher in the next two years, as salaries rise and the rupee loses ground against the euro and dollar.
Marius M"unstermann, head of sales and marketing at PixelFaerie, says SA's cost base will remain stable over the same timeframe, which will give the country a cost edge over India.
M"unstermann explains that salary increases in SA are expected to be more moderate than those in India. In addition, local inflation is stable, which means cost increases will not surprise on the upside.
He adds that Cape Town-based BPO companies will be able to hold their pricing structure over the long-term. PixelFaerie, for example, has not had a price hike in six years.
Not cheap enough
SA has long been positioning itself as a BPO destination of choice, and has been adding more services to the mix, such as back office administration. The country also has a language, time zone and cultural affinity with its main target market, Europe.
However, the country's BPO sector has come under pressure for not being cost-effective enough due to a range of factors, including high telecommunications costs.
India's cost hikes will also mitigate some of the effects of the stronger rand, which earlier this year gained strongly against the euro and the dollar.
The strength of the currency was concerning, because it eroded some of the cost-saving proposition of setting up a South African operation.
Bulking up
M"unstermann says PixelFaerie will grow its staff base by about 30% by the end of next year to take advantage of India's expected cost increases.
Fagri Semaar, acting CEO of Business Process enabling SA Western Cape, says: “We are seeing a definite trend from BPO destinations who are viewing SA as a real alternative to India. There are a number of reasons behind this, with cost obviously a major one.”
Semaar explains that India's rising costs will result in the playing fields being levelled.
“The issue of quality, as opposed to cost will be a major factor for international investors. This bodes well for SA, whose BPO value proposition is centred on quality,” he says.
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