Through The Fly's Eyes: Call Centers

from Larry Ramer of Theflyonthewall.com












The Philippines’ Booming Call Center Industry

If you have a Sprint Nextel (S) or AT&T (T) Cingular cellular phone, the next time you call customer service with a question about your phone, you may very well speak to someone working in a Philippines-based call center. Sprint Nextel and Cingular are just two of several American companies that have chosen to outsource their call centers to the Philippines, according to an article in today’s Investor’s Business Daily’s “The New America” feature. Other companies that utilize call centers in the East Asian country include Dell (DELL), Vonage (VG), and Time Warner (TWX). Wachovia (WB) plans to open a call center in the Philippines next year.

India was still the top country for call center outsourcing by American companies as of 2006, according to a study conducted by Booz Allen Hamilton and Duke University, and quoted in a November 2006 International Herald Tribune article. But the Philippines has several important advantages over India as a call center destination.

While Indians’ English can be difficult for Americans to understand, Filipinos’ English is easy on Americans’ ears, since the Philippines spent several decades as an American colony, and many Filipinos have family in the U.S., according to Investor’s Business Daily. I became friendly with several Filipinos while working in a foreign country several years ago, and I can confirm that their English tends to be quite good. In fact, they almost always spoke English amongst themselves.

Filipinos are also adept at understanding American culture and imitating different Americans accents, according to the International Herald Tribune article.

In addition, Filipino call center workers tend to be more loyal to their employers than their Indian counterparts. While turnover rates at some Indian call centers have approached 200%, turnover at Filipino call centers tops out at 40%, according to the International Herald Tribune. Meanwhile, outsourcing companies say that wages for Indian call center employees have grown 50% over the past five years, as a result of competition for top employees.

These factors have led to a boom in the Filipino call center outsourcing business. According to capital markets and asset management firm Robert W. Baird, the Philippines’ call center industry is growing at a 40% annual clip, compared with 23% for India and 1% for the U.S. That statistic was included in today’s Investor Business Daily article. From 2005-2006, the Filipino call center industry expanded by a whopping 90%, with revenue reaching $1.7B, according to the International Herald Tribune. From 2001 to 2006, the number of Filipinos working in call centers jumped from 2,000 to 200,000, according to the country’s president, Gloria Macapagal Arroyo, as quoted in the Herald Tribune.

One beneficiary of the Philippines’ rapidly increasing popularity as a call center site has been ETelecare Global Solutions (ETEL), which set up a call center near the Filipino capital of Manila back in 1999, according to Investor’s Business Daily. The company’s revenue increased 50% in Q1 to $62.1M, while profits grew 217% to 19 cents per share. The firm’s operating margin of 11.8% is among the highest in the industry and analysts predict ETelecare’s profits will reach 80 cents per share this year.