For well over a decade, India has been the destination of choice for western companies looking to outsource their call centre operations and take advantage of the country’s vast and cheap labour pool.
But with Indian salaries expected to rise 13 per cent this year, at least one UK company has decided it’s cheaper to operate out of northern England than in Mumbai.
According to a report in the Daily Telegraph, New Call Telecom said it was leaving Mumbai to open a call centre in Burnley, Lancashire after being attracted by low commercial rents and cheap labour costs there.
As Nigel Eastwood, New Call’s chief executive, told the Daily Mail:
Salaries in India aren’t that cheap any more. Add to that the costs of us flying out there, hotels and software, and the costs are at an absolute parity.
Mr Eastwood added he also expected to save money through better staff retention in Burnley.
In the UK we will pay workers the minimum wage. Given the current economic environment, we will get good “sticky” employees who will also receive bonuses linked to performance.
A decade ago, companies from the US and the UK arrived in India in droves attracted by India’s low labour costs. But this is no longer true as the economic boom bought on by liberalising reforms has pushed up costs. Real estate prices have spiralled while companies have struggled with wage inflation and staff retention.
“Voice-based call centres have attrition rates of 25 – 35 per cent, which adds to operation costs,” said Arup Roy, a research analyst at Gartner, an IT-specialist market research consultancy.
As India’s upwardly mobile young professionals frequently switch jobs in search of higher wages, salary increases in the IT outsourcing industry in India are expected to average 11.9 per cent, according to Aon Hewitt, the global human resources company.
Some of India’s biggest business process outsourcing companies told the FT last year that it is now cheaper to conduct businesses in some parts of the US and the UK. But up until now such cases of relocating back to the country of origin have been few and far in between.
“This [relocating back to the US and UK] is certainly not a trend, but companies are moving back also because of the political backlash over outsourcing, especially in the US,” said Roy, adding that companies are more likely to move call centres to other low-cost destinations such as the Philippines due to cost and linguistic advantages over India.
“Many of the smaller Indian companies are starting to shut down because they are no longer competitive, but larger ones are still winning new business from existing and new clients as they provide new value-added services,” he added.
Private sector backtracks on ‘offshoring’, FT
Calming the outsourcing debate, beyondbrics
Falling FDI pinches Indian outsourcers, beyondbrics
The MTV school of English: how Philippines overtook India in call centres, beyondbrics
India: outsourcing, outsourcing, beyondbrics
Get alerts on Emerging markets when a new story is published