Putting up a call center? Think before you leap!!!

The Philippines is one of the hottest destination for business process outsourcing. It just places a little  notch lower than the India.  A lot of call centers and other business process outsourcing ventures have cropped up all over the country. More than half of the available jobs advertised in the newspapers are business process outsourcing jobs ranging from medical transcription to customer and technical support and legal services among others.

Instead of being stagnant because of the dwindling dollar, our export sector has exhibited growth due to business brought about by business process outsourcing.

My brother who is our company’s vice president for finance wanted us to join the bandwagon. He was interested in involving our business in the business process outsourcing industry specifically in the call center operations. I expressed my reluctance that we do so since this is totally unrelated to our existing line of business although I acknowledge that business process outsourcing is the next big thing in business for the decades to come. So I decided to tag along and listen to the series of meetings between our proposed partners. A would be partners had extensive experience in the call center industry and is now currently a call center development consultant.

As the meetings progressed, I learned a lot of things that dispelled my misconceptions about call centers. These are as follows:

1.) Operating a Call Center still follows the traditional business processes – Contrary to what most people believe, Operating a call center does not spell instant big bucks in a short period of time. Just because the demand in the market is so big and because you are earning dollars does not necessarily follow instant profits.

According to the study presented to us, it is only in the second year that the call center starts to profit. In the first year, losses or a break even has to be incurred first. This is similar to any kind of business. You can’t expect to profit immediately. There is a window of time where sacrifices have to be made. Just like any traditional business you have to have a good management team. A lot of small time call center operations have been shutdown due to bad management. Most importantly your Human resource has to be very good as this is one of the most important departments of the call center operations.

Putting up a call center is just like putting up any other business. You will have to follow traditional business processes and rules. It’s just that a call center is more sophisticated since it involves international factors and hi-tech equipment. But the principles in handling the people, processes and profits are very much the same with traditional businesses.

2.) Operating a Call center requires intensive Capitalization – Most people believe that putting up a call center requires very much little capitalization. After all you just rent a small space, put up a bunch of computers hook it up to internet connection and viola !!! You can now begin operating right ? Wrong !!! Operating a call center requires intensive capitalization. The dialing software alone cost more than a million pesos. Add to that the computers, plus you have to get licensed copies of Windows XP. You have to set up a server, a good stable and fast internet connection, hook up the wires, buy i.p telephones that call center agents will use.

We are not talking here about setting up an internet café. During the early phase of the operation you have to shoulder to salaries of your people first as it takes time for your clients to process your bill. And the salaries of those in the call center industry are not cheap. The lowest you can give call center agents is P 10,000.00 otherwise they will transfer to another call center. So it is not as easy as it thinks.

3.) Call center operations requires intensive marketing – Some people think that because there is so much demand for call centers they can just build a call center and expect clients to come. This kind of thinking is very erroneous. Clients are not just looking for “call centers” per se. They are looking for reputable call centers. Call centers that can deliver services that their clients wants them to deliver. As a new player, you will have to establish yourself as somebody who is reputable. This requires that you present to them that you have sufficient equipment, the proper kind of people and more importantly the proper kind of management team. This requires that you market yourself intensively.

Big players in the industry have no problem with that. Clients immediately sign up to them because the have already established a name. But what about small players ? They usually only get the outbound. (Outbound refers to call center agents calling persons abroad trying to sell something or offering a service while inbound refers to catering to the needs of already existing clients of big companies who are outsourcing their services) There is money to be made in outbound but the problem is most outbound agreements are usually performance basis. So if your agents are good at selling or convincing people to buy your client’s products or services than you make money. If not, then you loose. It may take some time for small players to establish themselves as reputable and trustworthy with the outbound before clients entrust them with the inbound.

Again this is not an easy thing. Operating a call center requires intensive marketing just like any traditional business. I even know of someone who has built a call center expecting clients to just pour in, until now their call center is a white elephant and it has been there for more than 2 years.

With all these in mind, before you jump into the bandwagon of the business process outsourcing industry especially call center operations, think before you leap !

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5 Responses to Putting up a call center? Think before you leap!!!

  1. ivy says:

    My client’s business here in Pinas is building call centers. They don’t run it but build it. They are bringing the investors in the country to lease the centers. They have been pretty much successful, and he is only in his 30’s.

  2. zigfred says:

    Ivy: That’s a cool business. At least they only build it and lease them out. In my friend’s case (2 years old+ call center) he got a couple of inquiries but none of them worked out. Last December he told me there was a company wanting to do a “joint venture” with him. I don’t know how it went. I hope he was successful. So let me get this straight, the business of this client of yours is that he is asked by someone to build call centers ? And then he also provides his client with investors that will lease out the call centers he built for his clients ? Just curious.

  3. ivy says:

    Sorry, let me straigthen that out. They send proposals to companies in the US, when the deal is done, that’s the time they build the centers; from the floor carpet to the Avaya systems. I am sure someone in the US works with them to close the deal.

    Recently, he told me that he was building a call center near Tiendesitas and in Iloilo City.

    I thought at first they were the call centers themselves but he clarified ” we only build the centers so when the tenants move out, they leave everything behind, not a single pc.”

    I think they call themselves as systems integrator and solutions & services provider.

  4. zigfred says:

    Ivy: Oh ok. The beautiful thing about tht deal is that they are only the ones who builds it not run it. My friend on the other hand built his call center expecting that clients wil eventually come because the demand is so huge. More than 2 years has alreedy passed, but still no client. If there are clients, talks will break down or something goes wrong. He should have secured the market first before building the call center. But anyway that is business, learning from your mistakes, but it sure was a costly mistake. Nevertheless the center and the equipment is still there so hopefully his new joint venture agreement will work out. By the way after the tenants move out, what happens to the equipment they left behind ? Will the assume ownership of it ?

  5. ivy says:

    I just dont know if they apply the leasing concept of US in which they could sell the equipment in a fair market value upon fulfillment of the contract.

    I guess I need to do more chit chats with my client. ha!

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