Indian vendors focus on help desks, call centers

October 23, 2001 —

Indian software services companies are increasingly turning to running help desks and call centers for customers of multinational clients as a new investment opportunity.

For instance, Bangalore-based Wipro Ltd., one of the country's largest software services companies, announced last Friday that it is investing US$10 million in New Delhi-based Spectramind eServices Pvt. Ltd., a provider of outsourced voice and nonvoice customer support services to multinational clients.

Wipro hopes the investment will give it a beachhead in the global market for outsourced customer services. While Spectramind will offer first-level support to customers, the technology-intensive second- and third-level support will be offered by Wipro, according to Vivek Paul, vice chairman and chief executive officer of Wipro Technologies, the software development and services unit of Wipro Ltd.

"Our ability to make a joint offer both expands our market opportunity, as well as anchors customers by being a single-stop shop," Paul said.

Infosys Technologies Ltd., another large Bangalore-based software and services company, is also looking at getting into business process outsourcing.

"High-end technical remote service support is an example of an area we might consider," said Nandan Nilekani, chief operating officer of Infosys Technologies.

The new trend is mainly customer driven, according to Roland Wee, fund manager at ING Investment Management, based in The Hague.

"It is done mainly to broaden their service offering to their customers. The current outsourcing of development and maintenance will be broadened to include support for the end-users as well," Wee said. "An example of this is if Infosys and Wipro develop a switch for a customer, they could be asked to provide support for the end-users of the switch as well."

Outsourced customer service is low-margin business compared to software development.

"Typical margins are about 15 (percent) to 25 percent, depending on the complexity. Software development margins are about 35 (percent) to 40 percent," Wee said.

Whatever the margin, Indian software development companies may have no choice but to offer outsourced services, according to Anil Advani, senior analyst at Mumbai-based investment firm, UTI Securities Exchange Ltd.

"(Software companies) think that if they do not supply this expertise, an existing client will go to some other call center and in the process, if the call center has software services to offer, they may lose the whole business from the client," Advani said.

Indian software companies face competition from pure-play vendors in the outsourced customer service business.

"It is true that the software companies have the client leverage, because of their software business, but we will not be hit because the market is large enough for everyone," said Prakash Gurbaxani, chief executive officer of 24/7 Customer.com, a start-up that runs a support center in Bangalore. "The challenge before the software companies is whether they can achieve our low cost structures and whether they can execute as well in this business."

Software companies will also have to keep adequate distance between their mainstay software development business and outsourced customer services. The investment in Spectramind allows Wipro to participate in the new business opportunity without diluting its per capita operating margin, according to Wipro's chairman, Azim Premji.

Apart from depressing margins within the company, an in-house outsourced customer service business could make the software services companies lose focus.

"It would be terrible if they tried to do everything in one entity," Wee said. "The dynamics of operating a call center and other customer relationship management initiatives are very different from software development. For one, the incentive structure for employees is worlds apart. Different skill sets are required in such operations, and for all of them to be rewarded by the same stock options would mean that the software developers are carrying the others along."

Wipro in Bangalore can be reached at 91-80-844-0079 or http://www.wipro.com/. Infosys Technologies in Bangalore can be reached at 91-80-852-0261 or http://www.infy.com/. 24/7 Customer.com in Bangalore can be reached at 91-80-841-0775 or http://www.247customer.com/.

ITworld.com