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Call centres get the busy tone

George Smith Alexander & Anusha Subramanian

It seems to be a classic case of too many cooks spoiling the broth. Venture capitalists, financial institutions and banks have put on hold all loans to call centres, which have been mushrooming across the country. While big players by and large remain unaffected, smaller and independent operators are finding the going tough.

The main reason given by the banks and the FIs for not entertaining these centres is the drop in revenues, per seat, from around $20 to $3-5 per seat per hour. Per seat per hour is a call centre terminology, which takes into account the cost of the place, technology, phone call, person and the software used. In other words, it refers to what a call centre would charge for one person to make a call using its hardware, software and the international lease line.

"Too many players have entered the call centre business and they have started outbidding each other to get contracts. Triggered by the slowdown in the US markets, companies there have cut down on their spends which is also affecting the market," says a senior executive at the Industrial Development Bank of India.

Monica Deveshwar, country manager, IT Practices at Frost & Sullivan says: "Among the two types of call centres present in the country now, the worst hit are the e-mail call centres. The rates at these centres have dropped to $2-3 per seat per hour. The rates for voice call centres now prevail at $12-18 per seat per hour. The voice centres still command some premium as these require a certain amount of skill sets."

IDBI, through its venture capital fund scheme, has given assistance to five call centre projects in places including Bhubaneshwar, Calcutta, Hyderabad and Madras. However, it has put all further assistance on hold. Says the IDBI official: "We have decided against further exposures in this area for the time being. We may review the decision when the call centre rates stabilise at around $10-12."

Venture capitalists, a major source of funding for call centre operations, are looking at funding only the higher-end business, staying away from back office operations. "We are looking at funding higher-end service providers rather than back office operations like processing of credit cards," says Pravin Gandhi of Infinity Venture Fund.

According to an ICICI official, the call centre as an industry has not evolved business models, which justify a steady cash stream on the basis of which banks and FIs can lend.

Adds an HR consultant: "Higher capacity has been created and this has led to a decline in quality of service. Secondly, intermediation is gaining ground in the US and most of the call centres here are dependent on the intermediaries who take their commission and then pass on the business to the Indian operators. In the process, companies here are left with very little commission. Thirdly, an overall slump in the US has forced companies there to cut rates. This has affected the local call centres which are skewed to the overseas markets."

"The call centre phenomenon can be compared with that of the dotcom business where initially there was excess funding followed by a lull. The lenders will come back again when the market stabilises," says Priya Hiranandani, CEO, Zenta Technologies.

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