Lesson for Pakistani Call Centers

India looses 100 centres in 3 years
It appears that not all Indian call centres end-up as success stories. As many as 100 call centre companies are estimated to have shut shop in the last three years on account of unviable business model, and exodus of employees to larger well-established Business Process Outsourcing (BPO) firms. “There were roughly 300 call centre companies primarily into outbound calls in 2002, and under 200 today. While we do not track these statistics, we estimate that over 100 call centre companies, that had entered the `BPO Gold Rush’ without any viable business model, disappeared during the period. It was more a real estate play than anything, where promoters took advantage of the existing real estate to install phone lines and foray into call centre operations,” Mr Sunil Mehta, Vice-President of Nasscom, has said.

Mr Mehta said the top 20 players in the market currently account for half of the overall revenues, and added, “there are definitely fewer and more serious players in the market today.” Most of the companies that exited call centre business had functions ranging from selling phone plans to new drugs to credit cards. “Most of these companies worked on the success-based fee rather than the per-person-per-hour basis. For instance, they would get paid only if they sold a specific number of cell phones plans or credit cards. Many of the vendors had obtained contract through middlemen and the payments were few and irregular,” he pointed out. Moreover, many of the employees of these call centres moved on to well-established call centre firms.

According to Mr Mehta, the number of call centres may come down further in future. “Keeping aside the factors such as mergers and acquisitions which will lead to consolidation in the industry, with cost of capital exceeding the returns, entrepreneurs may find it easier to re-deploy capital,” Mehta pointed out. Asked if companies that went out of business, sold-off assets to other players, he said, “The infrastructure that these companies had were not sophisticated. Most of them operated through a mailing list and phone lines. As far as the manpower is concerned, they easily got alternate jobs,” he said.