Unfulfilled promise

South Africa can compete with the global community at lots of things, but not at BPO or call centre outsourcing, it seems.

Despite 10 years of trying, we're still a very long way behind India, the Philippines and even some African countries as an attractive destination for global companies looking to offshore their BPO or contact centre operations.

Unlike many sectors of the IT industry that are location-neutral, BPO and contact centres are closely tied to many socio-economic factors in a country: crime, quality of life, cost of labour, cost of bandwidth and the overall perception by others.

Johann Kunz, MD of Fusion Outsourcing in the Cape, says SA is just not suited for the mass outsourced BPO market.

"We don't have the resources, we don't have the volume and our salary and resource cost is too expensive," he says. "But we have quality here in our agents: our command of English is a big advantage and that qualifies us to play well in the niche market such as financial services. We tend to be slightly better at sales, both inbound and outbound and up-sell, while our customer service tends to be on a par with or slightly below our international competitors."

Fusion Outsourcing started operations in 2003 and started taking calls in 2004. Most of its clients are international but, ironically, it is now expanding into the South African market.

"We have learned lessons that we can bring to the local market," says Kunz. "We understand the human capital side and the regulatory requirements - and servicing international clients means we've been exposed to international benchmarking, which is real-time."

Danny Ross, Gauteng regional director for Spescom DataFusion, agrees that SA needs to go niche. "Say the Dutch want to come here. We could service them. Look at Mauritius. France Telecom bought Mauritius Telecom so that Mauritius now serves the French community. We could service the Dutch language, for example, and get a lot of good business. The Indians may not been great at English, but they've been working hard at it because that's what they had to improve upon to attract more business."

Competing on quality might be the only option for the moment, because we can't compete on price, says Yaron Assabi, director at ExperienceIT.

"We tend to be 30% to 40% more expensive than India and the Philippines. If American and European companies are looking at us, then it will be because of cultural alignment and quality. If it's just price, then it's very difficult to compete. We don't have much capacity and our middle management is a lot weaker. We also don't have the 20 000-seat call centres, so the scale and the geography are issues. That having been said, we are very competitive in certain niches and have a strong value proposition in high touch markets."

Anthony Askew, MD of Globility, says SA could get more voice business, because it's easier, but not the strict BPO.

"The BPO side relies a lot more on a strong school and tertiary education system. There has been an issue with Indian voice, certainly from the UK, and if we can just get 10% of that market, then we're full. I think we can steal some of the Indian and the Philippine voice; we have better voices with more neutral accents and a friendlier time zone."

Ian Gordon-Cumming, MD of Multipath Customer Solutions, says SA needs to be careful about believing its own hype.

"The Indian call centre industry is very well established, and if you go to the UK banking industry, for example, they don't care: it's cheaper and it's good enough, especially for a mass market. I agree that we need to pick a niche and become the best in the world at it. Certainly in telecoms and the areas around it, we could do well. Maybe we should also leverage our language skills a lot more. We've run a call centre with 38 different languages from this country. We shouldn't underplay that."

What should SA be doing to invest as a contact centre destination of choice? Bandwidth is a problem, says Assabi.

"One of the biggest issues that we've had - and I hope it will change soon - is the cost of telecommunications. It may only be 25% of your investment in a contact centre, but it's still meaningful. India and the Philippines are 20 to 50 times cheaper so when you compete on that component, it's difficult. There's another factor: I heard a talk in the BPO industry comparing Korea to SA and it made the point that because the Korean government got behind the cost of telecommunications, the country produced far more knowledge workers over time."

Askew agrees. "We have been positioning ourselves for 10 or 12 years now. Why haven't we got it right yet? If you could pin five reasons up on a wall and let society know about them, then we might get some growth. Bandwidth has been the number one reason for a while and still is. I don't believe the hype from Telkom and Neotel. I've been watching that for 10 years and it hasn't gone anywhere. We need to bring down the cost of a 2Mb pipe from R45 000 a month to R12 000 - not shave off R3 000 or R4 000 like Neotel is doing. It needs to be cut down to the bone. Because if you are going to get any of the skilled work - BPO, debt collection, financing and payroll - then you need a 1Gb fibre link between here and India, India and London, and London and New York. Otherwise you're not in the game. It has to be an extension of your LAN. We don't do that here because we can't."

But, although a large factor, bandwidth is not the only inhibitor. Taxation is another, points out Les Forsman, director at Avaya Intelligent Communications.

"An interesting study was done on BPO about six years ago and [found] the party that makes the most money out of BPO was the SA Receiver. If you go and do the figures, there's tax that's paid here, individual tax, tax on money coming in and so on. This is the biggest factor against people coming into this country. Tax breaks were mooted, but nothing ever happened. SARS still makes the most money out of BPO."

There's a wider problem too: national marketing. Louis Rossam, senior executive of products at Accenture, says SA is up against countries that shout louder.

"Quite apart from the tax breaks and incentives, the countries that have been successful have really marketed themselves," he says. "I'm not convinced we've done that well at all. We may get our infrastructure sorted, but we're not marketed globally."

I don't believe the hype from Telkom and Neotel.

Anthony Askew, MD, Globility

Spescom's Ross agrees. "On the marketing side, we could focus on giving our visitors a better experience. Can we get reduced rates in hotels? What tourist sites should they see? Give business visitors a better experience and the crime issues could fall by the wayside. Those are the kinds of small things we could do."

Says Hildburg Hofer, head of BPO at Swicon360: "Government should push the message more. The perception is that we have a crime problem. When we had a visitor from Germany recently, we fetched him and transported him everywhere to make sure that he didn't have a bad experience. He didn't bring his wife because he'd heard that Johannesburg has the highest crime rate in the world. Our government and press should push the innovation and the changes happening in the background more, and focus less on the crime."

And it's not as if government doesn't know what the priorities are or what the blueprint is for a successful environment: it's freely available.

"Marketing has been on the government's agenda for 10 years now," says Forsman. "Government bodies have had many interactions with successful countries and there's a blueprint on how to do it. We just need to go along with that blueprint. That's really how simple it is. Nasscom [the Indian National Association of Software and Services Companies, a consortium that facilitates BPO and IT services in India] is speaking to the Egyptians: they're now ready. The guys in East Africa are ready. They go to Nasscom and ask for the blueprint and they get it: we need tax breaks, free services, and six or seven months later, it's done. We've been waiting 10 years for this stuff to get sorted out. I mentioned this to the DTI people the other day and they said that I wasn't up to date. I replied that when I see large call centre outsourcers coming into the country is when I'll know I'm up to date. Otherwise, we're just spinning our wheels all the time."

Gordon-Cumming says if government isn't going to do anything about it, then it's up to the industry to do something about it.

"The problem is the industry is very fragmented. We call ourselves medium-sized, but the problem is that in global terms, we're tiny. We know what the problems are, so we need to elevate the discussion to the next step: what are we going to do about it? Because we know that it isn't going to be done for us."

It seems unlikely that SA's BPO market will grow much in the near future. BPO is a long chain from acquisition of a client through to termination and only one component of that is voice. Forsman says he doesn't see this country changing to a broader focus anytime soon. "There is a different charge, there are different agent skills that are required and it's not necessarily just inbound or outbound. Having said that, there is a player whose main site is here, it collects in Europe, but the call side is in Mauritius, so they're benefiting threefold and starting to get quite a bit of business. It is possible to have a site in India with agents sitting in India, the Philippines, Russia and SA, and all managed from one spot."

Are the DTI and SARS listening? Hopefully. Tax breaks for international outsourcers, vastly reduced bandwidth costs and free services, coupled with a national drive to promote the country as an outsourcer's dream, would be a good start. But that's what was said 10 years ago.