12 November 2003
As companies worldwide respond to increasing cost and efficiency pressures, South Africa is well placed to become a favoured international location for outsourced call centres and business process outsourcing.
Traditionally, countries such as India and the Philippines have led the way in servicing markets for the United States and Britain, among other countries. South Africa is quickly catching up, however, thanks to a range of factors working in its favour.
World-class service levels of call centre staff, time-zone compatibility with Europe, high rates of fluency in English, a (still) favourable exchange rate and an advanced telecommunications industry have all contributed to the growth of South Africa’s call centre industry.
South Africa became an even more attractive location to set up these businesses when a second undersea fibre-optic telephone link with Europe, along the east coast of Africa, was established in February. Another fibre-optic link runs along Africa’s west coast.
Dialogue UK opens shop in Cape Town
In March, British company Dialogue UK put R20-million into a call centre in Cape Town. The company’s investment is expected to rise to R70-million in the next three years, while the call centre’s staff complement is set to rise to 600 from 110 by early next year, reaching 1 500 by 2005.
Dialogue UK’s local operation, Dialogue Communications, already services several multi-nationals operating in South Africa, including Shell, Pfizer and British American Tobacco, as well as a number of nationwide newspaper and other publishing groups.
Since its acquisition of the local call centre, Dialogue UK has added a number of major UK names to its client list, including mail order business Truebell and Lexchatsafe, a company that monitors children’s use of the Internet in the US and UK markets.
Dialogue chairman Jason Drew told the Business Day newspaper that South Afica has enormous potential to become a major destination for outsourced contact centres from the UK, the US and the Netherlands.
Dialogue UK’s decision to invest in South Africa was prompted, among other things, by the “cultural fit” between SA and the UK, and what Drew described as South Africans’ “natural tendency towards service”.
Drew told Business Day that, according to an international report on the industry across a range of countries, South Africa’s skilled call centre workforce worked harder than its international counterparts – 243 days a year at 42 hours a week, compared with an international average of 220 days a year at 36 hours a week.
“Until recently the majority of UK companies outsourcing their customer contact services tended to look to companies in India, since operational costs are lower than in the UK and Europe”, Drew said.
“However, continually interrupted power supply issues, the marked time differences and a productivity rate lower than in South Africa, are encouraging organisations to consider this country, which offers excellent value and is supported by high standards of local telecommunications, banking, financial services and IT.”
According to Business Day, the call centre industry worldwide was predicted to generate an income of US$59-billion in 2003 to match the growing demand in areas such as financial services, home shopping, cellular telephony and healthcare.
The paper reported South Africa’s share at an estimated R523-million, but noted that the country had the capacity to increase this share significantly as its full potential was recognised and more foreign companies established call centres offshore.
Other globlal call centres in SA
GlobalTeleSales, Lufthansa’s Cape Town call centre, was set by the German airline in 1999 to fulfill its “follow-the-sun” 24/365 phone channel strategy (“Hours of Operation: 24 Hours a day, 7 days a week, 365 days a year”, the company boasts on its website.) GlobalTelesales reportedly handles between 100 000 and 120 000 calls a month for Lufthansa.
Active Contact Solutions was reportedly the first British outsource company to set up shop in Cape Town. The company has over 60 call centre seats in Cape Town servicing its UK customers. According to its website, the contact centre “has contracts with leading South African banks, a worldwide motor company, a leading South African FMCG company, and runs outbound debt chasing for a credit card company. It also runs several mail order contracts.” Offshore costs, according to the website, “are approximately 20% cheaper than those of UK call centres”.
Swiss-based outfit Mindpearl (formerly known as Qualiflyer Customer Care Centres) runs a state-of-the-art facility in Cape Town. The call centre has 129 workstations, employs 125 poeple, and has the capacity to grow to 650 seats and 500 employees by 2005. According to the SA Technology Vanguard, while MindPearl’s clientele includes airline and travel companies, future operations will also be focused on the financial sector in South Africa.
Offshore outsourcing and Team SA
In his State of the Nation address to Parliament in February, President Thabo Mbeki added outsourced call centres and business process outsourcing to a list of growth sectors that would receive special attention from the government.
And the department of trade and industry (DTI) has said that it wants South Africa to become an important player in back-office processing, software application development, architectural design, project management and engineering consulting.
The strategy, according to an article in the Financial Mail (May 2003), makes sense. “According to research firm Datamonitor, ‘offshoring’ is arguably the biggest threat to indigenous IT careers in the US and Europe as a result of a mass exodus of jobs to cheaper labour markets. IT, insurance, banking, airline and payroll management firms already use this to extend their work day across time zones.”
A report by Mitial Research, commissioned by the DTI and released in December 2002, found that South Africa is a highly credible alternative to other offshore outsourcing destinations, and that call centres, in particular, could create up to 100 000 new jobs by 2005.
Section 21 company CallingtheCape was established in September 2001 to market Cape Town and the Western Cape as a world-class location for establishing call centres.
And earlier this year, Team SA, an umbrella organisation made up of a cross-section of service providers, the government, Telkom and companies involved in technology, human resources and property, was set up to promote the country as a hub for global business process outsourcing.
Team SA aims to provide potential investors with a “one-stop” shop for doing business in the country. “The investor can get all the information required, without any single company punting its own value proposition”, Angelo Manzoni of Trade and Investment SA, a division of the department of trade and industry, told the Sunday Times.
Marina Bidoli and Duncan McLeod, writing for the Financial Mail (“Bring us your office”, May 2003), point to some signs that South Africa is on a winning track:
- “The SA subsidiary of German IT services company T-Systems is assisting the company’s North American operation with its internal SAP business software implementation. As part of this process, it has developed a template which will now be used to extend SAP to 23 T-Systems subsidiaries worldwide. The SA company will be closely involved in the global implementation, providing development skills, support and infrastructure.
- “The IQ Business Group has been appointed by US-based SunGard Employee Benefit Systems to develop its OmniPlus Pension Administration software. The agreement is the first step towards establishing a development and process centre for SunGard in SA. It will allow SunGard to sell offshore development services on behalf of its clients.
- “International players are starting to direct business to the SA arms of outsourcing companies such as EDS and Computer Sciences Corp (CSC). ‘North Americans are prepared to pay a premium. Though SA is not as cheap as India, we have greater know-how, particularly in financial services,’ says CSC SA MD Martin Vergunst. Last month, the company clinched a five-year processing deal with an unnamed US-based insurance company worth more than R500-million. Vergunst says offshore business processing for global financial services companies could generate sales of R1-billion a year within five years, creating about 1 000 new jobs.”