Regardless of what the analysts say, and how positive a picture they paint, experience on the ground is what counts. And, where the rubber meets the road, there are several companies that have great stories to tell about South African call centers.

Mike Semple, operations director for Fujitsu Services SA, oversaw relocation of call center operations from the U.K. to SA. ?There were a couple of angles on it. If you look at the history, SA was still operating as ICL, (while) the group had re-branded. Toward the middle of last year a decision was made to re-brand and re-invest in SA, and, as part of that process, we were then seriously considered for things like off-shoring,? he explains.

According to Semple the local operation tabled a business case to the group to be seriously considered for off-shoring. ?At the time the exchange rate was a little more favorable for an off-shoring initiative, and the business case justified it. It was not a huge kind of no-brainer, but it was justifiable,? he notes.

Beyond call centers

Although listed on the London stock exchange nowadays, Old Mutual PLC retains strong ties with this country, and has set up an outsourcing operation here. According to John Deane, director -- corporate development, at Old Mutual: ?What we are doing in SA is not rocket science ... it is making sure that we have the right structures in place to do outsourcing.?

However, Old Mutual believes SA?s potential extends beyond just call centers. Deane notes that, insofar as pure call centers and the management of IT systems are concerned, SA competes directly with India, China and Malaysia, among others.

However, he believes that the company has a very good understanding of financial services in this country, one which gives it a significant edge over other destinations. ?We already have scale within SA ... both within the industry and within Old Mutual itself,? he comments.

Deane points to an increasingly global business imperative to reduce costs while keeping quality constant if not improving it. ?A lot of companies are seeing that outsourcing helps them really define what they should be doing, what they are good at and, potentially, what they are not good at. It also gives them the clarity of written down, contracted service levels. And we think that is good,? he adds.

?That is a good discipline to be following, quite frankly, and I do see it as bigger than call centers and I see steady growth. I do not see it being spectacular mega growth, but steady, because these contracts are (typically) long-term contracts.?

Coming home

David Trepp, sales director of Hotline Call Centre Solutions, recently returned home after gaining experience in the global call center market -- specifically in Canada, the U.K. (including Ireland) and in India. He also believes that SA has huge potential, particularly for inbound call centers for the U.K. market.

?What I found was that there is one very sticky thing about the U.K.: British people like speaking to Brits. They do not like speaking to outsiders. But, when a customer is making an outbound call, there is an affinity to SA.?

Interestingly, Trepp believes that SA is ahead of Europe when it comes to the use of technology in call centers. Another advantage, he says, lies in the number of South Africans who are spreading their wings all over the world. ?The last couple of years with South Africans being out there, has been a marketing tool for companies to say: ?well if this is what I have employed, what else do they have in SA???

Deane believes the recent 10 anniversary celebrations helped to remind people about the option of using SA and, far from being negative, he says BEE reminds people of the changes that have taken place here. ?There are some soft factors, positive factors, such as the awarding of the (Soccer) World Cup in 2010, which are focusing people on the country.

?The economy is growing well, Barclays going back into the country, etc. There are an awful lot of things that are reminding people that there is a real good story here about the ability of the country. At the same time, there is recognition of the opportunity to create jobs as well,? he explains.

?People also see SA as a gateway to the rest of southern Africa ... whether that is over the short-, medium- or long-term. From a European perspective and a U.K. perspective, I am increasingly seeing people talk about SA in a very positive light. The stability of the rand has also been hugely helpful in that respect,? adds Deane.

Cultural differences

Gartner Consulting vice-president, Roger Cox, agrees that SA has cultural advantages over other off-shore destinations. ?There is quite a different culture in SA. Your way of doing things is different to India, where you need to absolutely specify a job, pass it over, wait for a while and it comes back -- exactly to specification.

?The SA culture tends to be different ... you will challenge what is being done if you think that it is wrong, and you will be far more interactive.?

Mark Walker, director of BMI-TechKnowledge (BMI-T), agrees, but points out that SA needs to find ways to assign a realistic value to that cultural difference.

?We patently cannot compete on the price of technical skills and productivity. We would be hard-pressed to compete effectively at those levels. In other words it is a higher order ... higher interaction, higher cost. That is going to have to be a differentiator that we will have to find a way to value in the market.

?It used to be known in the old days as quality ... it is a quality attribute that you would attach to the delivery of a service. But how do you value it? That is the big problem,? he says.

Not all plain sailing

As can be seen from the experiences of Fujitsu-Siemens, this has not always been the case. Semple says the improving exchange rate damaged the business case for SA vis-à-vis other destinations. ?It turned into a marginal business case,? he says, stressing however that this changed again with deregulation of telecoms in SA.

At a high level, he notes that before deregulation, a typical call center operation would break down the costs as follows: 35 percent telecommunications, 32 percent for people and 33 percent for general infrastructure. ?What has happened now is that we expect around a 40 percent reduction in telecommunications costs from April, May. That then pushes it back to a very healthy business case,? he adds.

Interestingly, the Fujitsu-Siemens example is also more than just a call center. ?We are in the IT help desk space,? notes Semple. ?The service we run here now is fairly complicated, process-wise, and it interfaces with other service delivery units that offer specialized services (to a global customer base).

?We did move some services to India but those were more basic services ... the way the guys in the U.K. describe it is, if someone makes a call and there are only five questions he can ask, five threads he can follow, that will go to India. It is cheaper, and it can be scripted well, and so on.?

Deregulation is great

Semple is positive about deregulation, but cautions that government is trying to strike a delicate balance. ?The country has a huge investment in Telkom SA Ltd., and it needs to realize a return on that investment.

?The sale of that business to third parties (offers) real equity and investment that comes into the country. That has to be weighed against the employment impact of lots of small contracts that could come into the country, and, at a macro level, that must be extremely difficult to quantify,? he adds.

Referring again to the tangible benefits Fujitsu-Siemens has realized from the deregulation, he opines: ?When you are marginal, people talk about quality of service, security, what is the risk of moving stuff and so on. But you then drop that cost by 10-15-20 points and suddenly that discussion changes. Because now ... well what is the risk of doing it, gee I do not know, but it is a lot cheaper.

?I think you will see a dramatic increase in the number of call centers in SA. Simply just on the anticipated reduction from group, we expect to get new business before the end of this year,? he adds.

Recent research commissioned last year by Calling the Cape and undertaken by Deloitte confirms this view - particularly as regards Cape Town. According to Deloitte, the city presents a highly competitive option to India, with high service quality, a stable workforce, robust skills base, and a business culture that is closely aligned to that of the U.K.

?First time call resolution -- a standard contact center quality measure based on the number of customer queries resolved on first point of contact -- stands at 89 percent in Cape Town?s contact centers, compared with only 65.9 percent in India, while staff attrition, recently reported to be 24.3 percent and rising in India, is stable in Cape Town at 10.7 percent,? notes a press release issued by Calling the Cape.

Not everybody agrees

David Gibbons, vice-president: business process outsourcing at Driva Solutions, a U.S.-based management consultancy specializing in call center and customer experience optimization, does not agree with all of Deloitte?s conclusions. ?Most of SA?s non-Indian competition comes from the Philippines, and, increasingly, Eastern Europe on the low cost end -- and on the high-cost end, Canada (and used-to-be Ireland),? he notes.

?Many SA BPOs are over-recruiting and underutilizing labor. You can see this in the fact that agent salaries have remained static despite huge growth -- this is not the case in India.?

Gibbons says SA has certain advantages that cannot be matched by destinations like India: ?SA offers excellent English language and cultural fluency that cannot be matched in India. The numbers are: 10 percent first language English speakers; 30 percent second language English speakers; first and second language German, French and Dutch skills; and 70,000 college and 110,000 (U.S.-equivalent) high-school graduates annually,? he says.

According to Western Cape premier, Ebrahim Rasool, these factors are having a positive effect on growth of the call center industry -- particularly in that part of the country. ?The large number of experienced agents, managers and other service personnel is a major benefit for U.K. companies looking to locate operations in Cape Town.

?An active domestic industry -- largely absent in India -- has created a body of experience and product knowledge that would be expensive to replicate. In financial services in particular the similarities, in terms of regulatory framework and product type, make it easy to recruit staff with highly relevant experience, leading to improved quality and the high levels of consumer empathy that contribute to high levels of customer acceptance and satisfaction,? he says.

The Deloitte research supports this view. It reports that the Cape Town contact center and BPO industry is showing significant growth, with the number of agents employed having risen by 25 percent to 11,000 in the past year.

Growth expectations for the next two years average 40 percent but are highest, at 141 percent, in the outsourced sector, where the influx of international business is likely to be greatest. Outsourcers now represent 30 percent of Cape Town?s contact center and BPO operations (up from 19 percent one year ago) and are already generating 55 percent of their revenues from international clients.

?The combination of local and international, in-house and outsourced operations lends the industry in Cape Town a very different character to other international offshore industries, such as India,? says Richard Smith, consulting partner, Deloitte. ?The presence of a local industry in SA gives a base of skills and expertise in management that is uncommon among offshore destinations.?

Western companies already operating in Cape Town report high standards of satisfaction. From a list of 37 factors that might influence a choice of investment location, 35 percent are judged to be growth enablers, and 41 percent growth neutral. The area?s strong skills base, standards of education, industry sophistication, technology infrastructure, geopolitical stability and quality of life are seen as the most positive contributory factors.

Copies of the Calling the Cape/Deloitte Key Indicator Report 2004 are available from the Calling the Cape Web site, http://www.callingthecape.org.za.