China’s New Engine of Growth for CRM - Call Center Outsourcing

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With Asia Pacific fast growing in importance as a global call center hub for both local and international companies, China has the potential to capture a large segment of this relatively new outsourcing market, according to Frost & Sullivan's latest report (Redefining The Competitive Edge of Companies in China - Customer Contact Management Strategy - December 2003).

According to the report, two key factors are driving the trend of offshore call center into China: the pressure on companies to constantly reduce cost of operation, and setting up a regional call center in China to enable business organizations to penetrate the local market.

Cost savings

China has traditionally been an ideal market for manufacturing, given its low setup cost and abundant labour force. These factors have also made China an attractive location for international companies to setup or even outsource their regional call center hub there, which are able to cater to Chinese-speaking markets such as Hong Kong and Taiwan.

Besides servicing the Greater China market, many Japanese companies are also looking at outsourcing their call centers in China, especially when comparing the cost of operating a call center in Japan is extremely high. The large existing pool of native Japanese speaking population in cities such as Dailian, coupled with the short distance transportation advantage, reduced telecommunications tariffs and good local government support have enticed many big names, such as GE Japan and Matsushita (manufacturer of the product brand Panasonic) to outsource their call centers in China.

Local Market Penetration

Separately, having a call center in China provides the added advantage of helping companies penetrate the huge local consumer market. Besides enhancing the level of customer loyalty locally, existing resources can be easily utilized to expand the call center to serve both regional and international customers, creating much synergy between cost savings and gaining market share.

"In the near term, we are seeing consumer durables to continue to lead the adoption of China's outsourcing call center services, but this trend is expected to be overtaken by growth driven primarily by the financial services and telecommunications industries," said Mr Manoj Menon, Partner, Frost & Sullivan Technology Practice. "However, this is not to say that the industry is not without its challenges."

Challenges

China's relatively new outsourcing call center services industry faces these challenges:



On top of the teething issues, China's outsourcing call center services industry also faces competition from India and the Philippines, as these two countries are presently amongst the top locations for offshore outsourcing contracts, mainly awarded from North America and Europe.

However, this is not stopping major contact center service providers from gaining a foothold in China to establish the country as an international hub for call centers.

Mr Menon added: "The sheer size of China's consumer market, compared to India and the Philippines, is what has attracted foreign players to the market in the first place. More importantly, service providers like PCCW have the necessary experience and know-how to tackle the language and culture differences, HR issues on training and recruitment, and managing the quality of service of these outsourcing call centers to give their customers much peace of mind."

"Given that China already has the necessary language and people skill sets to serve the Greater China and Japanese market, a large part of its initial growth will be driven by Hong Kong in the near term, subsequently followed by Japan."

"In the medium term of three to fours years, the improvements in skill sets and English speaking abilities will enable China to compete effectively against India and the Philippines for the lucrative outsourcing contracts."

Published: 05/2004
Author: Frost & Sullivan

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