Cheaper costs are attracting UK firms to move call centres and back office functions to India. But how do they deal with new cultures, languages and brewing political tensions? asks Nadia Elghamry
India has never had it so good. Economic meltdown, soaring office prices and a lack of space are not phrases you would normally associate with success, but these are exactly the reasons UK call centres and back office functions have abandoned their natural habitats and headed for India.
Of course, the country is not a random choice brought about by executives spinning a globe and deciding to relocate when it stops. The low cost of labour, an abundance of property, improving infrastructure and government incentives have all driven companies to see refuge in these low-cost havens.
But upping sticks and moving halfway across the world is no easy task. Language barriers, the enormous task of dealing with different cultures and growing political tensions all need to be weighed up. So exactly how easy is it for companies to move?
Call centres led the way but others quickly followed suit, with names like BUPA, Oracle, Microsoft and GE Capital all setting up operations in India. Soon everyone had heard the story about poor unwitting Mrs Bloggs picking up the phone to query her gas bill and instead of being routed through to, say, Newcastle, being put on to someone in Mumbai (Bombay).
Less apparent were the huge cost savings behind these moves. For example, when the unions leaked the Prudential’s recent decision to move some of its call centre jobs from Reading to Mumbai, behind the 850 job cuts was an 80% reduction in labour costs.
With cash savings this big, it is easy to see why businesses were so keen and it quickly became a fact that, while London may be calling, in the global village the call could be answered anywhere.
This has had obvious effects on Indian property markets. At first companies gravitated toward that capitals to take advantage of the labour force. But things quickly changed. By 1995, firms were drifting away, driven out by the high rents in the business areas.
This was compounded in 1997 when the IT services industry took a turn for the worse and the next wave of IT services and call centres looked for larger and even cheaper accommodation. So, where first generation movers set up shop in the business district of Mumbai, the second generation are finding it cheaper and easier to move to the surrounding suburbs.
“Perversely, in material values it’s more expensive in Mumbai than the UK,” explains Raj Madhani, a director at Insignia Richard Ellis.
The primary reason for this is the limited amount of space and the immaturity of the market, he says. Mumbai is the financial centre of India, and financial institutions want to be there because that is where the market is, he says. “Others go to Hyderabad where the cost is a fraction of the traditional centres.”
According to a report by Insignia Richard Ellis, suburbs in the north-west offer all the advantages tenants would expect from an out-of-town development in the UK: higher parking availability, reduced commuting time and closer proximity to the airport. This, coupled with buildings capable of offering large floorplates and low occupancy rates, will make these suburbs increasingly attractive, believes Insignia Richard Ellis.
It predicts Mumbai’s office market will be fed by “significant” supply from former mill lands now being redeveloped for commercial use.
Property investment is rising
This has given the Indian investment market a jolt although levels of property investment in the country have not reached the dizzy heights seen in the UK. “Investment is growing and the signs are that it is encouraging inward investment as well,” reckons Madhani.
The Indian government is hoping to encourage this further by offering incentives. While grants are not physical, the state has offered tax breaks on profits and has cut red tape in exchange for international companies putting in infrastructure such as power plants or building offices for local businesses and to attract further inward investment.
If the government manages to make this policy work, investment will flourish, agrees Sarah Evans, associate director at Jones Lang LaSalle. “There will be significant opportunity in India for those investors willing to take on the economic, political and tax issues.”
But it is not just executives seeing pound signs that has driven companies. ‘A location needs to have a suitable workforce with the right skills and these may not always be the cheapest,” explains Elaine Rossall, an associate of Cushman & Wakefield Healey & Baker’s European research group. Factors such as accessibility, connections to international airports and finding the right property all playa part, she says.
Low-cost environments
Amenities are also important, believes Rossall. “If you are looking at taking some of your existing workforce out there to help set up the centre, then you would probably look at standards of living and availability of schools.” If all of these factors are there, then most businesses look for a low-cost environment, especially in today’s economy, she admits.
It is this sentiment which has led to the new call centres being tagged the “sweatshops of the new economy”. According to statistics from the trade union Amicus, salaries at call centres on the sub- continent are £2,400 a year, compared to £12,000 in the UK In addition, Indian employees tend to have longer hours and shorter holidays.
Operators have been quick to dismiss this last point, saying the reason for this is because in India a job in a call centre is seen as a career rather than just a temporary job and most call centres only employ graduates.
Sir Keith Whitson, head of HSBC, added to this debate recently. Endangering already raw relations with UK unions, he praised the Indian workforce, calling them “highly educated” and “well dressed”.
Sir Keith said staff were hugely enthusiastic about their jobs and the quality of the work is exceptionally high. Furthermore, he stated, “in India they’re quicker at answering the phone, highly numerate and keen to come to work every day”.
This will be an important sweetener if companies are to ignore growing political tensions in the area. Uncertainty as a result of the conflict along the Indian-Pakistan border and the threat of a war with Iraq has caused many Western companies to delay decisions.
These delays have largely been viewed as an over-reaction, with the threat more presumed than actual. “It is perceived as a problem,” admits Madhani. If fit should come to the crunch, he explains, they are only taking calls in a different part of the world.
“If for some reason they did have to close one office down because of political problems, then all it would take is a flick of a switch to carry on anywhere else in the world.”
Probably more of a problem is the cultural difficulties that arise from doing business in a completely different society. But first movers seem to have gone some way to easing the path and reports are rife of Indian call centres educating their staff in anything from EastEnders to elocution and the British weather.
Indians sound “more American”
These reports have been largely overblown, believes Madhani. “People in India actually sound more American because of the influence from television,” he explains, adding: “They are buying more and more into the Western culture and, if you go into Mumbai, the average middle-class family will have access to MTV and CNN.”
UK healthcare provider BUPA believed these cultural differences were very important. It trod incredibly carefully when it set up a pilot study at the start of this year to shift some of its back office functions to Mumbai.
“The thing is to never underestimate working with a totally different culture,” says Gail Sumner, BUPA’s head of outsourcing. “If you do not deal with the little details, then you end up with problems.”
To overcome these, BUPA put its managers through culture training. This helped supervisors in the UK to understand the much more family-orientated culture in the workplace, says Sumner. It also thought it was important to educate its Indian staff in how it did business in the UK and arranged secondments to allow its new Indian managers to come to the UK.
“The last thing we wanted when starting up a pilot is for people to complain about the quality and for people in the UK to think India is incompetent,” says Sumner. BUPA decided to enroll the help of another company to help it set up its own premises abroad. “We realised this wasn’t our core competency and we did not have the confidence to set up our premises and run our own buildings,” she explains.
It chose a UK company called Trinity to run the pilot. “We spent a lot of time making sure that the service supplier had the same values and culture and beliefs and making sure that they use the same as we would expect here in BUPA in the UK.”
Because of its cautious approach, BUPA had few problems, says Sumner. “We started on something small as we did not want to do something critical to our business. And we had a really good experience.
“If you had to push me, the biggest headache was getting through the red tape,” she admits.
Bureaucracy the big difficulty
The Indian government is wising up to the fact that bureaucracy may be hindering investment.
It has put time and effort into improving digital connections and relaxing tax and the control some of the state-owned monopolies have over services. “I think they have tuned into the fact that there is a niche that they can fill,” says Sumner.
IRE’s Asian unit eases overseas relocation
Upping sticks and moving to another part of the world is not an easy task. Companies need to overcome the hurdles of not being able to speak the language, not being on the ground to supervise work and not understanding the rules and customs of a foreign country.
Realising this, Insignia Richard Ellis set up an Asian Business Unit to help both Asians looking to invest in property in the west and UK companies looking to relocate to Asia. The unit, launched late last month, is based on London and hopes to tap into the enormous growth in internal investment in India from international telecommunications, finance and energy sectors. “Corporations demand a global presence and they can use us as a conduit,” says Raj Madhani, a director with Insignia Richard Ellis, who heads the venture. “We can give them our knowledge, expertise and our people in India,” he adds.
Using Insignia Richard Ellis’s global network can save companies not just time and headaches but cash as well, believes Madhani. “Rather that spending a lot of time and money flying out to the country, they can just come and see me once a week in London.
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Total office occupancy costs |
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Suburbs in the north west of India are becoming popular as cost rise in financial centres |
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Country |
Location |
US$ per sq ft/year |
|
India |
Hyerabad |
9.59 |
|
India |
Channai |
14.52 |
|
India |
Pune |
15.96 |
|
India |
Bangalore |
17.70 |
|
India |
New Delhi |
40.32 |
|
India |
Mumbai (Bombay) |
45.24 |
|
Ireland |
Dublin |
51.99 |
|
Germany |
Frankfurt |
60.66 |
|
France |
Paris |
73.10 |
|
UK |
London-West End |
151.68 |
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Source: Cushman & Wakefield Healey & Baker |
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