Cross-border business process outsourcing is an emerging field in which India has moved forward aggressively. All around the world, however, countries now compete to offer BPO services to large multinational organizations. Knowledge at Wharton looks at a few countries and companies and the options they provide.


Philippines: Capitalizing on a Strong Telecom Service


For eTelecare International, a Los Angeles-based provider of BPO services, the decision to operate call centers in the Philippines is largely about the numbers.


The cost of a T-1 dedicated phone line between the United States and Manila has dropped from $30,000 a month to less than $10,000 in the past few years, says Peter Mikhalev, the firm s vice president for program management. And technology advances have ratcheted up the number of concurrent voice channels that can be crammed into each T-1 line by about five-fold. That means eTelecare gets 120 voice channels between Manila and the United States for less than $10,000 a month.


There s another important number to eTelecare: three providers of fiber optic do business in the Philippines, thanks to a deregulated telecommunications system. Mikhalev says the country s telecom service is reliable, and beat out that of India when eTelecare was choosing an offshore location for its BPO services two years ago. Fiber optic service was cheaper and easier to get in the Philippines than in India, Mikhalev adds.


Inexpensive telecom service, along with low labor costs and special tax breaks, help eTelecare offer an attractive bottom line to customers. The company says it has saved clients 45% to 50% in costs.


ETelecare, which has 11 clients and 1,300 contact center agents, is part of a burgeoning industry of customer contact centers. Contact Center Association of the Philippines, a trade group of outsourcing firms, boasts 13 members, including eTelecare, Los Angeles-based PeopleSupport and Tampa, Fla.-based Sykes Enterprises. According to the association, the Philippines offers a skilled labor pool of 29 million people and about 325,000 university graduates yearly. More than 95% of the population is literate. At the same time, labor costs are a fraction of what they are in the U.S. The association says the monthly rate for a project manager is between $700 and $1,150 a month in the Philippines, versus $3,600  and $7,100 in the United States.


The Philippines government also is backing the industry through tax incentives and the direct involvement of president Gloria Macapagal-Arroyo. In January, Macapagal-Arroyo toured Canada to promote the Philippines accompanied by Sykes CEO John Sykes. And when Sykes inaugurated its second contact center in Manila in September, Macapagal-Arroyo was slated to attend the festivities.


ETelecare, for one, is taking full advantage of the country s educated workforce. All its customer service agents have college degrees, and the firm can be picky even among these. It offers jobs to just 2% of candidates, yet 92% of its offers are accepted. Mikhalev says employees work in air-conditioned offices with 25 square feet of personal workplace and wages ranking in the top 10% to 15% of international firms hiring college graduates in Manila.


Some of the tasks handled by eTelecare require substantial training. For example, customer service agents need technical knowledge to take on help-desk requests from Dell Computer corporate clients. And some eTelecare employees have earned Series 6 and Series 7 certifications from the National Association of Securities Dealers to manage mutual fund tasks for another client.


Apart from possessing nitty-gritty knowledge of stocks and computer servers, the Philippine employees have another appealing trait: their English accent. Mikhalev points out that in contrast to India s legacy as a British colony, the Philippines have a history of close ties to the United States  including U.S. occupation of the country after the Spanish-American War at the turn of the last century. As a result, Filipinos have developed an English-speaking pattern that fits well with U.S. customers, Mikhalev says. The accent is “light and pleasant. People don t feel like they re calling a foreign country.”


ETelecare fortifies this American-friendly accent with cultural information. Each employee gets four weeks of introductory training, which includes a primer to American culture to help agents relate better to their customers across the ocean. “It s anything from basic geography to (the) most popular recent shows,” Mikhalev says. Workers also read about the latest U.S. headlines.


The Philippines itself has made headlines in U.S. newspapers. In September, there were reports of an Al Qaeda-related plot to attack the U.S. embassy in Manila. Earlier this year, an American taken hostage by the Abu Sayyaf rebel group was killed during a rescue operation and another American hostage was injured. The victims had been kidnapped more than a year earlier, and a third American was killed while in captivity. Abu Sayyaf has been linked to Al Qaeda.


ETelecare, though, says the country is safe for business. Jim Franke, eTelecare s president, points to a Time magazine article from earlier this year describing the Abu Sayyaf group as a fading movement of about 80 people. Franke also cites another number when seeking to calm potential clients: “The remains of the movement are currently being pursued through the southern province of Mindanao, which is 500 miles from our call centers in Manila, on an entirely separate island,” he said in a statement. “The activities of the Abu Sayyef (group) have never affected the business of eTelecare in any way.”


Jamaica: Answering the Call for Low-cost Call Centers


When the founder of Jamaica call center firm Westcom went to college in Canada, he studied hotel management  but fell in love with computers. “We never had computers in Jamaica. I was fascinated,” recalls Norman Anderson. “I d spend literally night and day in the computer lab practicing my skills.”


You might say Jamaica has followed Anderson s lead. In a quest to move beyond the tourist trade, the island nation has made a big leap into high-tech telecommunications and the call center business in particular. About one and a half years ago, Jamaica s telecom monopoly, Cable & Wireless Jamaica, laid a fiber optic ring around the country. The government also has begun liberalizing the telecommunications industry, allowing for satellite connections overseas. What s more, Jamaica has invested in a public training program to prepare residents for call center work.


A government-sponsored report estimates that Jamaican wages in the industry are about $3.50 per hour, that the total cost per call center agent (including wages, rent, telecom fees and other operating costs) is comparable to high-end Indian call center operations, and that the total annual cost of a 300-worker Jamaican call center is roughly $6.4 million. That compares to $9.9 million in Edmonton, Canada and $14.5 million in San Diego, according to the report.


Jamaica s investment in the call center field is paying off. The country boasts 13 call centers, providing more than 3,000 agents and seats, according to a study this year on the Caribbean call center industry sponsored by Nortel Networks. The Caribbean in general is answering the call for lower-cost call center operations. The Nortel study, conducted by consulting firm Zagada Markets, found a total of 50 call centers in the region, including 12 corporate in-house operations, and a total of 11,000 call center workers.


So far, Jamaica is leading the Caribbean in the number of call centers and call center workers. And Norman Anderson is a kind of homegrown success story for the industry. Westcom posted sales of about $1 million last year, and Anderson expects revenues to jump to $1.8 million this year. He employs roughly 220 people and expects that number to soar to about 1,000 by the end of next year.


At the beginning of his career in the hotel business, Anderson lobbied to increase the use of computers. Eventually, he started a computer sales and services outfit. In 1999, he realized the time was ripe to move into the call center field. But the transition wasn t simple. First, getting the right communications technology in place was a challenge. “There are not a lot of Cisco engineers here,” Anderson says. So he brought in networking experts from abroad  not a difficult task, since the engineers enjoyed the nearby resort area of Negril.


Anderson also had to hire a staff ready to service international customers. Jamaica s Human Employment And Resource Training (HEART) program helps, having set up a call center curriculum. All of Westcom s workers come out of the program. One aspect of the training is language awareness, Anderson says. Native Jamaicans typically speak a rapid-fire 220 words per minute, but call center agents need to slow that down to about 180, he says. Anderson makes sure his employees speak clearly and use standard English. Agents also are trained to de-emphasize their accent.


Beyond language training, Westcom s employees get 96 hours of instruction in the corporate culture of the client they represent, Anderson says, “so the image& that the client wants to portray is brought to the customer.”


Even so, it can be an uphill battle to win over new clients. Given notions of Jamaica as the land of Bob Marley and mellow vacations, Anderson s hard-nosed business pitch is a bit hard to believe when he presents his firm at international conferences. “We do raise a lot of eyebrows,” Anderson says.


But Westcom is working hard to convince clients that it offers a cutting edge product, including interactive voice response and predictive dialing systems. “In some cases, we have better technology than our competitors,” he says. “Our call centers are new.” Westcom s staff also has had to learn the technological ins and outs of cell phones to service client Digicel, an Irish firm providing wireless service in the Caribbean.


Westcom has signed call center deals with a credit card firm and a financial services company. Although the bulk of Westcom s business is its call center operations, the company has other offerings including Internet service and web site development.


Next year, Jamaica s telecom system is slated to be liberalized further. Anderson says the change will allow any part of the country to be equipped with a microwave link to a fiber optic or satellite connection. Not surprisingly, Anderson plans to lead the way into this technological frontier: Westcom is establishing a microwave network to prepare for more call center facilities.


Sri Lanka: Challenging its Larger Neighbor


Sri Lanka can get lost in India s shadow. But the island nation seeks to emerge as a major player in the business process outsourcing game just like its larger neighbor. In fact, Sri Lanka boasts better infrastructure and lower costs than India, claims Kris Canekeratne, CEO of Virtusa, a provider of IT and BPO services, which operates out of both Sri Lanka and India. Virtusa has fiber optic and satellite-based telecommunications links out of its Colombo, Sri Lanka facilities. And costs in Sri Lanka are 20% to 40% lower than in India, according to the company.


You might call Canekeratne, 37, a founding father of BPO in Sri Lanka. He grew up in this nation of 19 million, graduated from Syracuse University in the U.S. with a computer science degree, and became an entrepreneur. In 1995 Canekeratne started Virtusa with his wife, Sri Lankan native Tushara Canekeratne (now executive  vice president of technical operations), and John Gillis (now executive vice president). At first, Virtusa focused exclusively on IT services with a strategy of taking advantage of Sri Lanka s highly educated workforce  the country s literacy rate is estimated to be 89% for women and 94% for men. “It was a large, untapped resource pool,” Kris Canekeratne says.


And a cheap one with plenty of English speakers. The company estimates that IT workers in Sri Lanka earn about 10% of what their U.S. counterparts make, and that about 1.9 million Sri Lankans speak English.


By 1998, Virtusa clients began asking for help on tasks outside of software development, such as customer support and accounting services. In effect, Virtusa began doing BPO before BPO became a buzz word.


At this point, about 20% of Virtusa s business is BPO-related. The firm has about 25 clients  including security software firm Symantec, athletic apparel maker Reebok, and investment bank Credit Suisse First Boston  and roughly 1,000 employees. Of these, about 100 are located in the United States, 400 are in Hyderabad, India, and 450 are in Sri Lanka. Virtusa sees BPO as a future gold mine. Already the company is expanding fast. Its sales have soared an average of 70% each of the past three years.


But Canekeratne has had to guide his baby through some growing pains in Sri Lanka. For example, he had to push the Sri Lankan government to improve technical training for his workforce and extend high-speed connectivity to his facility. Canekeratne also had to secure special permission to give his Sri Lankan employees U.S. stock options. “The good news is we faced those teething issues six years ago,” he says.


He expects smooth sailing from here on. Some 8,000 people in Sri Lanka hold a college degree and a wider pool of around 20,000 have various IT diplomas and certificates, making them good BPO candidates, Canekeratne says.


Partly because of this trained workforce, Sri Lanka is becoming more known for Voice-over-Internet-Protocol technology than for tourism. Contact center outsourcing firm Webhelp is another company taking advantage of Sri Lanka s capabilities. Toronto-based Webhelp manages contact center services for firms including Microsoft, AOL Time Warner and Norelco, and has operations in countries including India, the Philippines and Romania.


Virtusa teams serving a client often have members in both India and Sri Lanka. The multi-country strategy aims to ensure business continuity and to allow the company to expand its operations, even in the case of political unrest. In India, tensions with Pakistan over the disputed Kashmir region have made headlines this past year. Sri Lanka, meanwhile, has weathered years of struggles between the government and the Liberation Tigers of Tamil Eelam rebel group.


Earlier this year, the Tigers and the government signed a cease-fire agreement. Canekeratne says the peace process has rejuvenated the country, adding “(the unrest) is a thing of the past.”


Even so, potential U.S.-based customers may not have heard this news. Virtusa s company base in Westborough, Mass. helps ease clients worries, Canekeratne says. “They don t have to feel that they re going into a foreign country, if you will,” he says. “They are working with a corporate headquarters in the U.S.


Still, Virtusa s culture is grounded in South Asia. For example, company events include cricket games  another arena where little Sri Lanka challenges giant neighbor India. At Virtusa, however, corporate collegiality rules the day. “The cricket rivalry goes on,” Canekeratne says. “But we prefer to play team versus team as opposed to country versus country.”